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Published by Jake Leahy

State Attorneys General Take Aim at BlackRock ESG Investment Strategy

August 16, 2022

Traditionally, the conversation in board rooms has almost exclusively been about maximizing profits and in turn, prioritizing shareholder value. As Environmental, Social, and Governance (ESG) becomes a more common phrase in the corporate setting, the so-called “stakeholder capitalism” still may face significant roadblocks to implementing social priorities when they run afoul of the potential returns of investors. 

In a letter to BlackRock dated August 4, 2022, 19 state Attorneys General signed on to question BlackRock’s statements made to various state agencies pertaining to the fund’s investments in the energy sector. Specifically, the fund is alleged to be focusing all of its investments on climate, the letter claims there have been roughly 2,300 company engagements specifically on climate. 

Although the decision to prioritize climate concerns when it comes to energy has become increasingly popular in the media and in politics, many state laws require that pension fund investments focus on maximizing financial concern. It is not lost on the Republican signed letter that fears of an imminent economic downturn may be playing a significant role in terms of assuring pension funds are equipped for a rapid decline in the stock and equities markets. 

An additional consideration that makes the letter interesting is the notion that much of the decarbonization priority from BlackRock has not only taken place behind closed doors. In fact, the fund’s efforts have been heavily publicized, as ESG has become an increasingly popular term with investors and in the political sphere. For example, BlackRock has said that it will have a dialogue with some leading environmental advocacy organizations to discuss reaching net-zero emissions. However, these state Attorneys General have a far different idea of what dialogue should look like under state law. 

“Regarding BlackRock’s commitments to climate change advocacy organizations, you state that you have joined them “to participate in dialogue with governments, companies, and financial institutions on sustainability issues important to our clients.”7 Under our state laws, the desired “dialogue” regarding any potential energy transition would be how to maximize financial returns, which would potentially include the opportunistic purchasing of fossil fuel assets discarded by companies seeking to meet net zero commitments.”

The entire letter has six different sections in which it outlines the potential issues with state law and BlackRock’s energy investment strategy. Those sections are: 1.) Neutrality; 2.) Dialogue; 3.) Duty of Loyalty; 4.) Duty of Care; 5.) Antitrust; and 6.) Energy Boycotts. 

To many, ESG is the next logical step to take in order for corporations to play a leading role in advancing change when it comes to social or climate related issues. Yet, state law largely continues to require certain duties for shareholders to investors. It remains to be seen whether shareholders, and pension funds for that matter, will be able to successfully argue against ESG implementation in the boardroom. 


While a well-considered ESG investment strategy might be a top priorities for corporations across the country, there might still be issues, as evidenced by the attorneys general letter. There may be significant discretion for states to halt investment in companies or funds focused on ESG pillars, rather than those focused on profits.

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