BlackRock Hit with ‘Cease and Desist’ Order Over False and Misleading ESG Statements to Investors

Craig Bannister | March 28, 2024
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BlackRock, the world’s largest asset manager, has been hit with a first-of-its-kind “Cease and Desist Order” and threat of massive fines, regarding its alleged false and misleading statements to investors regarding its Environmental, Social and Governance (ESG) practices.

On Wednesday, Mississippi Secretary of State Michael Watson and the Securities Division of the Secretary of State’s Office issued a Summary Cease and Desist Order and Notice of Intent to Impose Administrative Penalty against BlackRock, Inc.

According to the order was issued “in the public interest and for the protection of investors” because BlackRock is violating provisions of the Mississippi Securities Act. The Securities Division is seeking to stop BlackRock’s alleged fraudulent actions and impose a multimillion-dollar administrative penalty, a press release from the secretary of state’s office explains:

“BlackRock has recently asserted itself as a leader in the investment industry to promote environmental, social, and governance (ESG) factors on portfolio companies. 

“The Securities Division alleges BlackRock, through its ESG assertions, has repeatedly made false and misleading statements to Mississippi investors. These misrepresentations pertain to BlackRock’s involvement in pushing ESG factors on portfolio companies.”

The company is also cited for omitting important facts regarding its investments, as they pertain to ESG, in statements to investors.

BlackRock is duping investors into thinking its “non-ESG” funds aren’t driven by ESG criteria and is also falsely leading investors to believe its ESG funds maximize profits, the order says:

“BlackRock made untrue statements that certain of its funds do not incorporate ESG considerations. As detailed extensively in this order, BlackRock stated on multiple occasions either expressly through publications or by action that the company does in fact incorporate ESG considerations into its non-ESG funds.”

“BlackRock made express and implied material misrepresentations and omissions about its investment strategies related to ESG. As detailed extensively in this order, BlackRock has overstated the extent to which its ESG aims bear on companies’ financial performance and positioning. These statements lead investors to believe that BlackRock’s ESG provides a financial benefit to its ESG funds.

“However, BlackRock has admitted that the consideration of ‘sustainability characteristics’ – including characteristics related to climate change – is not an indicator of financial performance.”

Indeed, BlackRock CEO Larry Fink has admitted that the term “ESG” is so toxic that he “won’t say it anymore” because, when people hear the term, “We lose the conversation.” Instead, BlackRock appears to have resorted to more surreptitious means of using its clients' money to further its ESG agenda.

“[M]any 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,” the Cease and Desist Order says.

Each material misrepresentation, omission, fraud or deceit upon another person in violation of the state’s Securities Act will be treated as a separate offense.

The Securities Division has already “uncovered thousands of potential violations” – each of which carries a $25,000 penalty – and will continue to look for more as it continues to investigate until a final order imposing penalties is issued, the order states.

Thus, BlackRock is facing fines totaling of tens of millions of dollars.

"Investment companies will not push their political agenda on Mississippians, especially through fraudulent and deceptive means,” Secretary Michael Watson said in a statement:

“All citizens should have the opportunity to make informed and educated decisions when investing their hard-earned money. If not, our office will hold these bad actors accountable." 

Mississippi’s effort to protect investors from being harmed by asset managers intent on imposing their ESG ideology, at the expense of their clients' financial interests, has national implications, a leading consumer advocate told Fox Business:

“Will Hild, the executive director of watchdog group Consumers Research, lauded the state's move, saying such actions could defeat ESG policies nationwide.

“‘This first-of-its-kind action made by Mississippi Secretary of State Watson is another huge blow to Larry Fink and his continued support of the Leftist ESG agenda,’ Hild told FOX Business in a statement.

“‘Larry Fink and BlackRock continue to pretend that the only time they engage in ESG, it is with permission of the shareholders, but in reality, ESG policies have seeped into every facet of BlackRock's asset management.’”

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