A federal judge ruled Friday that American Airlines’ pension fund did so violate the law by making investment decisions based on criteria other than the interests of the plan recipients. The decision by Judge Reed O’Connor, a George Bush appointee for the Northern District of Texas, follows a decision by American Airlines management to allow BlackRock to manage its pension fund, which in turn oversees environmental, social and governance issues. applies principles rather than financial performance as a guide for investments.
Federal law governing retirement plans does not allow this type of investment strategy, “no matter how noble the goal,” O’Connor wrote in one 70-page decision.
The judge said that “the American’s incestuous relationship with BlackRock and his own corporate goals disloyally influenced the administration of the plan.”
If BlackRock thought numbers offered security, they were wrong. The “everybody does it” defense didn’t carry much weight.
For the reasons discussed below, the Court concludes that the facts establish convincingly that Defendants breached their fiduciary duty by failing to act loyally and solely in the best financial interests of the Pension Plan by acting in accordance with their corporate interests and the ESG interests have allowed BlackRock to influence the management of the plan. However, the facts of the case do not force the duty of care to reach the same result. The defendants acted in accordance with prevailing industry practices, even as leaders in the trust industry managed to set the standard. This is fatal to the plaintiff’s claim for breach of precaution. Accordingly, it is the plaintiff’s responsibility to determine the merits of his claim for breach of fidelity, but not his claim for breach of precaution.
Whatever the outcome, this one lawsuit appears to have driven stakes into the heart of the deeply evil ESG investing craze that once seemed poised to exert influence over every sector of our economy via activist and left-wing pension fund managers.
The day before Judge O’Connor ruled that BlackRock had sacrificed pension payouts to retirees on the altar of ESG investing, BlackRock, the world’s largest asset manager with $11.5 trillion in assets under management, made the announcement retreat out of Net Zero Asset Managers Initiativean international group of asset management companies “committed to supporting the goal of net zero greenhouse gas emissions by 2050 or sooner.”
This makes BlackRock the latest asset manager to rethink the business model of ripping off investors in exchange for invitations to the right events.
The exits are clearly related to American Airlines’ lawsuit, which imposes damages on asset managers for breaches of their fiduciary responsibilities. One cannot ignore the impact of an upcoming Congress that is ESG skeptical. Last summer, the House Judiciary Committee called the ESG movement a violation Antitrust law.
While elections bring uncertainty, an antitrust issue is sure to feature prominently regardless of the outcome; namely the future of environmental, social and governance (ESG) initiatives.
One need look no further than the political theater that unfolded this summer with the House Judiciary investigation into antitrust concerns surrounding ESG initiatives. In June, the House Judiciary Committee released one Interim staff report It detailed what it said was direct evidence of a “climate cartel” made up of “left-wing activists and major financial institutions” that allegedly “worked together to impose radical environmental, social and governance goals on American companies.” “, including decarbonization and net zero emissions.
Trump’s modern Federal Trade Commission chairman, Andrew Ferguson, said one of his priorities is to “go after collusion in DEI.” [diversity, equity, and inclusion]IT G [environmental, social, and governance]and advertising boycotts.” Combine the court decision and the climate on the Hill with the modern head of the Justice Department’s antitrust division. Gail Slatera former colleague of Ferguson’s, and you have a huge warning sign that says get out of ESG now and stay away.
Although ESG is still a huge deal in Europe, who cares?
This month the left was dealt two sedate blows in its march through corporate America. Not only is ESG effectively dead because it may be illegal to operate these factors in wealth management, but DEI is definitely in trouble as it has been hit in court (see Fifth Circuit Deals Blow to DEI on Wall Street – RedState and Supreme Court Rejects Race). -based college admissions – but how did we get here? – RedState) and the boardrooms (Meta Ditches DEI programs “effective immediately” and UNC-Chapel Hill Led Race-Based). Admissions Fight, Now Trustees Ban It – RedState).
Read American Airlines’ decision
Spence v. American Airlines from streak on Scribd
