Tennessee Attorney General settles ESG dispute with BlackRock

(Reuters) -Republican-led Tennessee and asset manager BlackRock (NYSE:) settled a dispute over the company’s use of ESG factors in its investment decisions, according to a statement by the state’s Attorney General Jonathan Skrmetti on Friday.

BlackRock will increase its disclosure of proxy voting practices and has agreed to audits by a third-party service to ensure it adheres to the agreement.

“The Attorney General has taken into consideration that BlackRock has taken various actions to clarify the role of ESG in BlackRock’s investment processes and proxy voting decisions,” a court filing said.

The settlement ends a lawsuit that the state had filed in December 2023 against the world’s biggest asset management firm.

“While investors are always free to buy cause-oriented products instead of focusing on maximum return, this settlement ensures that only investors who make a knowing choice will see their assets directed toward these non-financial goals,” Skrmetti said in a statement.

BlackRock’s stance on ESG — environmental, social and governance — issues has drawn sharp criticism from “red” states, which accuse the company of prioritizing them over financial interests.

The company, however, has dismissed these allegations. Its CEO Larry Fink said in 2023 that he had stopped using the term ESG because of how weaponized it had become.

BlackRock said it was pleased to resolve the dispute with Tennessee.

“BlackRock has consistently acted in the best interests of (its) clients, and we welcome the opportunity to demonstrate that fact through even greater transparency about our practices,” a spokesperson for the company said.