Dive Brief:
- Indiana Secretary of State Diego Morales sent BlackRock a cease-and-desist order Thursday, alleging more than 50 counts of securities violations over alleged “misrepresentations” of the firm’s ESG commitments in relation to its investment strategies, according to the order obtained by ESG Dive.
- The order alleges that BlackRock’s claims that certain investment accounts don’t follow “sustainable, impact or sustainable investment” strategies “cannot be reconciled” with the firm’s overall commitments to ESG through memberships like the Net Zero Asset Managers initiative and its now-downgraded involvement with Climate Action 100+.
- The Hoosier State’s treasurer had previously made BlackRock the first firm on the state’s ESG watchlist, and now becomes the second state to issue the firm a cease-and-desist this year. Mississippi issued a cease-and-desist order based on similar allegations in March.
Dive Insight:
BlackRock manages “some funds” for the Indiana Public Retirement System and “more than 415,000 Indiana residents,” according to Morales’ order. The cease-and-desist lists 54 counts of alleged Indiana securities violations related to statements the firm has made regarding its ESG integration, which the order alleges contradict with disclosures BlackRock has made for non-ESG funds.
Morales’ office alleged in an Aug. 22 press release that despite BlackRock’s disclosures on certain funds that say the firm does not use ESG strategies, the asset manager has “issued several statements and actions in commitment of using all assets under its management to incorporate ESG considerations,” including advancing net-zero goals.
“My office is committed to rigorously enforcing the law and strengthening our regulatory frameworks to ensure Hoosier investors are protected and that those who exploit the system are held accountable,” Morales said in the release.
BlackRock said the order “completely mischaracterizes” the firm’s approach to investing, calling it “a politically motivated attack,” in an emailed statement to ESG Dive on Monday.
“We are only focused on helping hundreds of thousands of Hoosier clients achieve their investment goals,” the statement said. “We intend to defend ourselves and our clients against this arbitrary use of state power.”
The order notes BlackRock’s status as a member of the United Nations-backed NZAM, whose signatories commit to “[i]mplement a stewardship and engagement strategy, with a clear escalation and voting policy, that is consistent with our ambition for all assets under management to achieve net zero emissions by 2050 or sooner.”
The letter also notes the firm’s work with CA100+, which has seen several outflows of signatories throughout the year. BlackRock transferred membership to a smaller international arm of its business in February when JPMorgan and State Street left the climate coalition.
Goldman Sachs and subsidiaries of Franklin Templeton and Sun Life became the latest to exit in recent weeks, following a renewed probe into the group’s members by the House Judiciary Committee.
“By virtue of being the world’s largest asset manager, BlackRock exercised tremendous proxy voting power to implement its ESG standards, including its CA100+ and NZAM commitments,” the order said. “However, BlackRock has often downplayed the extent of its actions.”
BlackRock’s latest investment stewardship report showed the firm supported just 4% of environmental and social-related shareholder proposals in the 2024 proxy season. The firm’s support for such proposals has dwindled, as it has viewed more of them as after supporting 7% in 2023 and 21% in 2022.
The order also lists the prior finding by the Indiana State Treasurer’s Office, which also pointed to BlackRock’s NZAM membership as evidence of the firm’s ESG commitments.
