A federal judge struck another legal blow against ESG, ruling that non-financial decisions made in 401(K) accounts were illegal.

A federal judge ruled Friday that American Airlines violated its legal responsibilities in managing employees’ retirement assets by encouraging environmentally and socially responsible investing in its 401(k) plan.

American Airlines Inc. violated federal law by filling its 401(k) plan with funds from investment companies that pursue environmental, social, and corporate governance goals, a Texas federal judge ruled Friday in the biggest victory yet for opponents of the strategy.

A federal district court in Texas found that American Airlines prioritized ESG investment goals ahead of employees’ financial interests, violating its fiduciary duties under ERISA.

This was the first challenge to a DC plan sponsor’s use of environmental, social and governance principles, and the judge’s ruling adds to the efforts by certain politicians and legislatures to claim ESG principles adversely affect retirement plan investments.

The presiding judge found the airline breached its fiduciary duty under federal law by prioritizing non-financial considerations in its employee retirement plan.

NR has reached out to American Airlines for comment. BlackRock routinely points to high returns on its ESG products and its client satisfaction in response to criticism of its inv

A U.S. district judge in Texas ruled that American Airlines (NASDAQ:AAL) violated U.S. law governing employee retirement investment management by basing investment decisions on socio-political outcomes rather than exclusively on financial terms.