ESG Enforcement Tracker

Key facts:

In August 2024, Indiana Secretary of State, Diego Morales, issued a summary cease and desist order against BlackRock, requiring BlackRock to cease allegedly fraudulent actions relating to its environmental, social and governance (ESG) funds and focus. The order appears to have been made through the Securities Division.

In summary, the Securities Division alleges that BlackRock has repeatedly made false and misleading statements to Indiana’s investors, noting that these misrepresentations “pertain to BlackRock’s involvement in pushing ESG factors on portfolio companies” and that BlackRock “informed clients they would see better long-term financial prospects and financial outcomes through ESG-backed funds, with little to no evidence to substantiate the claim”. It is said that BlackRock has claimed that funds marketed as non-ESG do not follow an ESG strategy, despite also issuing several statements and actions in commitment of using all assets under its management to incorporate ESG considerations, including advancing the environmental goals of net zero carbon emissions.

Diego Morales commented that, “Investment companies that engage in fraudulent activities not only betray the trust of their clients but undermine the integrity of our financial markets. 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.”

A statement by a BlackRock representative described the order as “a politically motivated attack that completely mischaracterises BlackRock’s approach to investing… We intend to defend ourselves and our clients against this arbitrary use of state power.”

This follows a number of similar complaints filed against BlackRock in the Mississippi Securities Division in March 2024, and also a civil lawsuit initiated by the State of Tennessee.