by Colby Reece
For the first time in the United States, an investment firm is being sued for its misleading Environmental, Social, and Governance (ESG) investment strategies, and our state is leading the charge.
Tennessee State Attorney General Jonathan Skrmetti accused BlackRock, Inc. of deceiving Tennesseans by downplaying their ESG-related investment goals and pressuring corporate boards to do the same.
As the world’s largest asset management firm, BlackRock is supposed to be maximizing returns for Tennesseans who invest with them. Instead, BlackRock’s decisions often run counter to Tennesseans’ financial well-being and prioritize covertly investing capital various social causes like slowing climate change and promoting workplace diversity, equity, and inclusion (DEI). The problem is, these strategies are proven to lose money.
American Enterprise Institute Senior Fellow Phil Gramm recently published a comprehensive report demonstrating that most ESG investment strategies lose money and fail to achieve their desired ends.
AG Skrmetti simply demands transparency from BlackRock and other asset managers tasked with investing Tennesseans’ money. Already, BlackRock has invested $40 billion of Tennesseans’ hard-earned money; obviously, they deserve to know that their financial wellbeing is being prioritized over flighty and unproven ESG goals. Yet, BlackRock promises one thing and does another, intentionally confusing investors about its commitments and plans.
On Fox Business, AG Skrmetti noted that attorneys general from other states are also looking into the issue of asset management transparency. Their concerns reflect the broader truth that asset management firms, including private equity firms, often deceive investors about their true intentions. For example, the private equity firm Prime Group failed to disclose its CEO’s conflicts of interest to investors. In another instance, Maine’s public employee pension fund lost $22 million from failed investment by the private equity firm Paine Schwartz Partners. Additionally, the private equity firm Eldridge Industries allegedly misused teachers union funds to invest in high-fee and low-return plans. The list goes on and on. Investment deception is widespread, and Tennesseans stand to lose.
Innocent people in Tennessee and throughout the country have become victims of asset management deception. Tennessee’s pension funds, for example, continue to invest hundreds of millions of dollars in private equity firms. Something must be done to promote investment transparency, lest Tennesseans lose their pensions and other investments.
We must keep asset management firms accountable. AG Skrmetti’s investigation is an excellent first step. If successful, Skrmetti will obtain a hefty sum, which will serve as restitution for Tennessee consumers and the state. Other states should follow suit – who knows what they will find when they pull back the curtains.
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Colby Reece is a co-owner at C&R Cattle Company, a third generation cow-calf operation.
Photo “Exterior of BlackRock” by Americasroof. CC BY-SA 3.0.
