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ESG cannot reconcile fiduciary duty


By Jed Rubenfeld and William P. Barr

Nineteen state attorneys general wrote a letter last month to black rock CEO Laurence D. Fink. They warned that BlackRock’s environmental, social and governance investment policies appear to involve “widespread violations” of the single interest rule, a well-established legal principle. The single interest rule requires that investment trustees act to maximize financial returns, not to promote social or political goals. Last week, the attorneys general Jeff Landry and Todd Rokita Louisiana and Indiana, respectively, went further. Each has issued a letter warning its state pension board that ESG investing is likely a breach of fiduciary duty.

The Louisiana and Indiana opinions did not make headlines but have seismic implications: They suggest that state pension fund board members, investment staff and investment advisers could be held liable if they continue to allocate funds to ESG-promoting asset managers such as BlackRock.

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