BlackRock Tried to Dance in the Mississippi Mud But It Didn't Go Well
Michael Watson, the Mississippi Secretary of State has told Larry Fink and the would-be rulers of the universe at BlackRock to “cease and desist” with the world’s largest money manager's attempt at dancing in the Mississippi mud with the state's money. The general story on this may be found here and a few excerpts are offered below:
According to Bloomberg, BlackRock Inc. faces the prospect of being barred from offering securities in Mississippi after state officials accused the investment firm of making “fraudulent” statements regarding its climate strategy.
This marks at least the second time BlackRock has faced legal action from a Republican-led state over environmental, social and governance factors, joining Tennessee.
Mississippi Secretary of State Michael Watson issued an administrative “cease and desist” order released on Wednesday to the world’s largest money manager. In a 33-page document, Watson alleges that BlackRock is misleading investors in its funds about the firm’s climate-related efforts.
“Many of BlackRock’s acts, practices and courses of business operate or would operate as a fraud or deceit upon investors and potential investors in Mississippi,” Watson said in the order.
When I read about lawsuits, decisions, orders and the like, I usually look for the documents themselves to draw my own conclusions. I'm certainly glad I did so in this instance, as the 33-page document includes some very revealing insights into the arrogance of BlackRock, if nothing else. Here are some examples:
BlackRock has made and continues to make untrue statements of material fact, and to omit material facts to make its statements not misleading, to investors and potential investors in Mississippi. These misrepresentations pertain to BlackRock's provision of investment services, especially its involvement in pushing Environmental, Social, and Governance ("ESG") factors on portfolio companies. Additionally, many of BlackRock's acts, practices, and courses of business operate or would operate as a fraud or deceit upon investors and potential investors in Mississippi…
BlackRock claims that its non-ESG funds 'do not seek to follow a sustainable, impact, or ESG investment strategy." This claim is untrue and deceptive because BlackRock has committed to use all assets under management to advance the environmental agenda of reducing carbon emissions to "net zero."
The second category of BlackRock's deceptive statements relates to BlackRock's funds that are marketed as ESG funds ("ESG funds"). BlackRock has claimed and claims that ESG benefits companies' long-term financial prospects and drives financial outcomes for clients. These statements are untrue, or omit to state material facts to make them not misleading, because the consideration of ESG factors does not provide an indication of better financial returns or current or future risk profiles…
As of late, the underperformance by ESG or other environmentally motivated investments has accelerated. See, for example, Greg Ip, "Who Will Pay for Green Transition?," Wall Street Journal. November 30, 2023 (The Nasdaq Clean Edge Green Energy Index and the S&P Global Clean Energy Index have declined approximately 50 percent from January 2021 to November 2023 compared to the S&P 500 which has increased 20 percent)…
Since most ESG funds are heavy on tech company stocks and the performance of tech companies relative to the general market is no longer strong, ESG funds are now almost universally performing worse. The continued unreliability and unpopularity of electric vehicles and the realization by investors that alternative energy hype does not match engineering or financial reality is not helping either…
The statements within this second category are misleading to investors who are interested in ESG investing for financial (as opposed to social or political) reasons, and who are led to believe that BlackRock's ESG funds will receive a financial benefit from Black.Rock's consideration of ESG criteria. In addition, BlackRock charges higher fees for some of its ESG funds than it does for comparable non-ESG funds…
BlackRock has committed to engagement that is based on a sustainable, impact or ESG investment strategy-directly contrary to what it represents to investors and potential investors in its non-ESG funds. As a signatory of the Net Zero Asset Managers ("NZAM") initiative,
BlackRock has committed to "[i]mplement a stewardship and engagement strategy, with a clear escalation and voting policy, that is consistent with [the] ambition for all assets under management to achieve net zero emissions by 2050 or sooner." And BlackRock has specifically pledged toimplement that strategy "[a]cross all assets under management."
The rest of the filing supports the above with assertions that BlackRock has been pretending to be non-ESG when, in fact, it has fully committed to ESG investing across the board in very significant ways. Check it out for yourself, but it appears BlackRock is attempting to dance but you don't dance in the Mississippi mud unless you know what your doing. You don't get away with just pretending like you might in, say, New York.
#Mississippi #MississippiMud #BlackRock #ESG #Investing