The Right-Wing Judge on a Mission to Destroy ESG Retirement Planning

The notorious Reed O’Connor is back with another one of his patented-troll decisions, this time threatening to upend the world of socially conscious investing.

https://newrepublic.com/article/190212/reed-oconnor-esg-investment-blackrock

https://archive.ph/SyOB5


There are more than 800 federal judges in the United States. None of them create as much work for their colleagues as Reed O’Connor, a federal judge who serves in the northern district of Texas. For nearly two decades, O’Connor has delivered one ideologically driven ruling after another. No matter how many times those decisions are overturned by the appellate courts and the Supreme Court itself, he persists.

In his latest haphazard ruling, O’Connor held last week that American Airlines violated its legal obligations to employees by allowing BlackRock, the company’s 401(k) manager, to consider “environmental, societal, and governance” factors when making investment decisions and casting proxy votes. If upheld on appeal, the ruling threatens to upend the entire retirement plan industry by opening 401(k) managers to litigation and penalties for using ESG factors as part of their investment strategies—something that nearly every manager has done in recent years.

At issue in the case is whether the airline violated its legal obligations to employees by investing their 401(k) plans with BlackRock, one of the nation’s three largest investment managers, while the investment firm pursued environmentally and socially conscious goals. The class-action plaintiffs claimed that the airline financially harmed its 401(k) participants by not sufficiently scrutinizing BlackRock’s ESG principles when investing and casting proxy votes in shareholder meetings.

BlackRock currently manages more than $10 trillion in retirement funds. Like nearly all such managers, it adopted a series of ESG policies over the last decade. Those policies led it to use its proxy voting powers on behalf of shareholders to encourage companies to adopt more socially and environmentally conscious policies. In perhaps the most famous episode, it sided with a group of activist investors in a 2021 proxy vote to put three members on ExxonMobil’s board who would push for investments in renewable energy.

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