FOR IMMEDIATE RELEASE

MEDIA CONTACT: Ryon Harms, ryon@asyousow.org, (310) 579-2188

BERKELEY, CA—JANUARY 10, 2024—Today, Judge Reed O’Connor, a federal judge in Texas, ruled that American Airlines violated its fiduciary duty to retirement plan participants by failing to prevent Blackrock from engaging in investment actions to address long-term risk and value-creation.

“If left to stand, the district court opinion in Spence v. American Airlines poses a serious threat to investors’ right to rely on financial advisors and asset managers or make their own informed decisions about how to invest their retirement savings,” said Danielle Fugere, President and Chief Counsel of As You Sow. “This decision is a threat to the fundamental tenets of capitalism.”

Financial institutions, including banks, insurance companies, and asset managers, overwhelmingly recognize that climate change is resulting in serious and growing economic losses. For example, Vanguard estimates that failure to limit climate change may lead to a 10% decline in global GDP, while insurer Swiss Re estimates losses of up to 18% of global GDP.

These costs will be felt across the entire economy, making it impossible to diversify risk, a core strategy for retirement plans to increase value over the long term. Fiduciaries have an obligation to consider and mitigate long-term climate risk; this decision will handcuff them from doing so.

Judge O’Connor’s opinion in Spence v. American Airlines asserts the authority of federal judges to second-guess investment professionals about how best to manage Americans’ retirement savings. The opinion claims that asset managers’ concern about long-term climate risk is “mere pretext,” and just a “rhetorical device.” The court concludes, “Just because BlackRock says [climate change] is ‘financial’ or ‘material’ does not automatically mean that it is.” Instead, a federal judge in Texas will have the final say over your investment choices and risk considerations.

This is especially troubling because the opinion is premised on a series of factual inaccuracies—the most egregious of which is outright climate denialism. The opinion refers to climate change as “nebulous” and “unproven” even as the nation is experiencing one of the most serious climate crises in its history, with more than 10,000 structures in Los Angeles burned in out-of-season wildfires fueled by the dryest 22-year period in more than a thousand years.

Fugere continued: "Long-term risk analysis is not just nice to have—it's essential to safeguarding the hard-earned retirement savings of American workers. This decision, which all but dismisses environmental and social risk, will prevent investment professionals from performing the thorough, forward-looking assessments on which millions of Americans depend.”

Judge O’Connor also asserts that all ESG investing prioritizes social change over financial returns, thereby underperforming “traditional” investing. The court makes this finding of fact even while asking for supplemental briefing on “what, if any, direct evidence links ESG investing to financial underperformance” in this case and acknowledging the possibility that “no actual losses occurred” here.

It may be difficult to establish losses in this case because the plaintiff’s case is premised primarily on the theory that BlackRock harmed retirement plan participants by voting for a slate of dissident directors at ExxonMobil in May 2021. As the public record (and Exxon’s stock ticker) clearly demonstrates, the director replacement reversed “years of underperformance” by the company, culminating in the company being dropped from the Dow index on August 31, 2020. Since the new board took over, XOM stock has more than doubled in value.

 "The idea that a federal judge can take away your freedom to invest according to your own research and priorities is outrageous and a direct attack on personal rights,” said Andrew Behar, CEO of As You Sow. “Are we living in a nanny-state where our financial decisions are made by a judge rather than the person who earns the money? This ruling is purely political and filled with disinformation in an attempt to force people to think and act in a prescribed way.”

About As You Sow

As You Sow is the nation’s leading shareholder representative, with a 30-year track record promoting environmental and social corporate responsibility. Its focus areas include climate change, ocean plastics, toxins in the food system, the Rights of Nature, racial justice, and workplace diversity. Click here to view As You Sow’s shareholder resolution tracker.