Texas Hits BlackRock, Banks with ESG Probe

Last week,?Texas, joined by nine other states, launched an investigation into BlackRock, JP Morgan, Bank of America, and other U.S. banks over their potentially illegal ESG practices.

Starting with a Bang:?The letter begins,

Each of you—BlackRock, Goldman Sachs, Morgan Stanley, JPMorgan Chase, Bank of America, and Citigroup—....appear to have embraced race- and sex-based quotas and to have made business and investment decisions based not on maximizing shareholder and asset value, but in the furtherance of political agendas. We, the undersigned Attorneys General, are concerned this may violate federal and State laws. ?

Zoom In:?The prosecutors allege:?

• Quotas in Exchange for Lower Interest Rates:?The banks and BlackRock allegedly colluded to amend revolving-credit agreements "so that BlackRock will save or pay millions of dollars based on whether BlackRock meets race- and sex-based employment targets."
• "Optics Only" Retreat from Net Zero:?The letter accuses the targets of leaving some net zero groups, while remaining members of other climate-focused organizations and making "public statements of continued, independent commitment to the net-zero agenda." As the prosecutors explain, "[t]hese actions raise serious concerns as to whether your exodus is an optics-only effort."
• Discriminatory Supplier Quotas:?The letter alleges that the targets use illegal set-asides, making minimum spending commitments for suppliers owned by members of certain races or genders.

Next Steps:?The letter contains dozens of detailed questions for BlackRock and the banks to answer, including why the asset managers voted for climate measures and whether they've ever conducted any financial analysis to determine whether their diversity policies add to, or subtract from, shareholder return. The letter also indicates that the prosecutors are interested in speaking with key employees once responses are received.? Those responses are due March 12.??