BlackRock, Inc. has settled a dispute with Tennessee over its ESG practices, which the state said misled consumers.

Attorney General Jonathan Skrmetti filed a consumer protection lawsuit against the investment firm in December 2023. The state accused BlackRock of failing to tell investors how much environmental, social, and governance considerations had been incorporated into its investment strategies. The alleged misrepresentation "deprived consumers of the ability to make an informed choice," Skrmetti said.

ESG is an acronym used in conjunction with environmental, social, and governance policies in investments.

BlackRock agreed to increase its disclosure of proxy voting practices and to a third-party audit to show it is complying with the state's terms.

The state is dismissing the lawsuit.

“This resolution assures that the money Tennesseans invest with BlackRock is managed consistent with the funds’ disclosures,” Skrmetti said. “While investors are always free to buy cause-oriented products instead of focusing on maximum return, this settlement ensures that only investors who make a knowing choice will see their assets directed toward these non-financial goals.”

BlackRock is one of the nation's asset management firms. The company announced earlier this week it was leaving the Net-Zero Banking Alliance. Financial institutions participating in the United Nations-backed alliance agreed to "align their lending, investment and capital markets activities with net zero greenhouse gas emissions by 2050 or earlier," according to its website.

Goldman Sachs, Wells Fargo, Citigroup, Bank of America, Morgan Stanley and JPMorgan also left the alliance.