A US federal judge has ruled that American Airlines’ focus on environmental, social, and governance (ESG) factors in its employee retirement plan is illegal, citing a breach of the company’s duty to prioritize financial interests. The ruling is considered significant as it appears to be one of the first instances where a court has challenged ESG investing practices.
The decision came after a four-day trial, during which American Airlines was found to have allowed its asset manager BlackRock to influence investment decisions based on non-financial factors. US District Judge Reed O’Connor stated that American had violated its legal duty by allowing BlackRock’s focus on ESG factors to disloyally influence the administration of the plan.
American Airlines said it would review the decision, while a BlackRock spokesperson emphasized that the company acts independently and prioritizes financial returns for its clients. The lawsuit was filed by American pilot Bryan Spence on behalf of over 100,000 participants in the retirement plan, alleging violations of federal law under the Employee Retirement Income Security Act (ERISA).
The ruling is part of growing backlash against socially-conscious investing, with some conservatives questioning the trend’s financial implications. In a related development, BlackRock announced it would leave an environmentally-focused investor group amid pressure from Republican politicians.
Source: https://www.reuters.com/business/aerospace-defense/american-airlines-focus-esg-401k-plan-is-illegal-us-judge-rules-2025-01-10