Mississippi State's Secretary, Michael Watson, launched a cease and desist notice against BlackRock on Wednesday over ESG funds, threatening to impose a multimillion-dollar penalty against the multinational investment giant.
The 33-page notice highlights two primary issues:
Non-ESG Funds: BlackRock markets some funds as not focusing on ESG factors. However, Mississippi alleges that BlackRock's involvement in certain initiatives contradicts this claim.
ESG Funds: Mississippi also alleges that BlackRock's statements about the financial benefits of considering ESG factors are deceptive. They argue that there is no evidence that ESG considerations lead to better financial returns or reduced risks.
There's a broader context where some Republican politicians in the U.S. have been critical of BlackRock and its ESG focus, accusing the firm of following a social agenda or harming energy companies.
This isn't an isolated incident. Tennessee and Texas have also taken action against BlackRock, alleging misrepresentation regarding its ESG practices.
BlackRock denies the allegations, stating that it always acts in its clients' best financial interests and complies with the law. They emphasize their commitment to maximizing returns for their clients.
Is BlackRock at fault? Well, if there is any concrete evidence (not mentioned in the notice) that the company has indeed misled investors with its statements, that will unfold with time. However, mixing ESG with politics without any concrete evidence is something that shouldn't be practiced, as there are much bigger stakes here.
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