FIRST ON THE DAILY SIGNAL—A federal court ruling regarding ESG investing with BlackRock could put public pension funds on the defense, a consumer group is warning.
Consumers’ Research sent letters to the largest public pensions boards in each state Tuesday warning BlackRock’s focus on ESG–an acronym for environmental, social, and governance–could lead to serious liabilities and a breach of fiduciary duty and put trillions of dollars in American pension money at risk.
In a first-of-its kind federal court decision on ESG, U.S. District Judge Reed O’Connor, of the Northern District of Texas, held in January in the case of Spence v. American Airlines that the airline’s pension was in breach of its fiduciary duty for allowing BlackRock to weigh ESG consideration in employees’ retirement plans. BlackRock was not a party in the lawsuit.
“In Spence, offering BlackRock funds in the company’s 401(k) plans violated the company’s duty to focus only on financial returns because publicly available evidence put the plan fiduciaries on notice that BlackRock uses its funds to pursue goals other than financial returns—like the ESG goal of reducing greenhouse gas emissions,” says the letter shared with The Daily Signal.
BlackRock, based in New York, had an asset portfolio totaling $11.6 trillion in 2024. It has come under fire in recent years not only for ESG investing but also for ties to China, as well as having former executives in highly placed administration positions under President Joe Biden. The company also leveraged its resources to push changes to the board of ExxonMobil.
Earlier this month, The Wall Street Journal reported BlackRock broke with climate groups and eliminated diversity targets in a story headlined, “BlackRock’s ‘Woke’ Era is Over.”
However, Will Hild, executive director of Consumers’ Research, contends BlackRock is still promoting net-zero carbon and is trying to rebrand.
“This ruling shows there could be lawsuits against the state pension fund or lawsuits against pension trustees,” Hild told The Daily Signal. “ESG investing is a danger to pension holders, a danger to taxpayers, and a danger to pension trustees that could be held personally liable.”
He said he’s hopeful this will change the investment strategy of the firm going forward.
“This is not a vendetta against BlackRock, but I am opposed to pushing a political agenda with people’s retirement,” Hild added.
American Airlines investments reportedly did not have ESG objectives and did not underperform.
“We always act independently and with a singular focus on what is in the best financial interests of our clients,” a BlackRock spokesperson told The Daily Signal. “Our only agenda is maximizing returns for our clients, consistent with their choices.”
The court ruling stemmed from a class action lawsuit by American Airlines pilot Bryan Spence with more than 100,000 participants in the retirement plan.
O’Connor, an appointee of George W. Bush, said in the opinion, “The evidence made clear that [American’s] incestuous relationship with BlackRock and its own corporate goals disloyally influenced administration of the plan.”
American Airlines did not immediately respond to an inquiry for this story.
The Consumers’ Research letter Tuesday asserts state pension boards should review their investment with BlackRock to ensure similar problems—such as politicized investments—aren’t happening.
“In conclusion, any state pension board using BlackRock to manage its pension plans is now on notice that a federal court has found that BlackRock acted with an ‘investment strategy … focused on ESG investing’ and ‘a pursuit of non-pecuniary interests,’ and fiduciaries of a fund that invested with BlackRock breached their duty of loyalty,” the letter continues. In January, Consumers’ Research sent a letter to all Fortune 500 companies warning of potential fiduciary duty violations and investment with BlackRock.
