As you can see http://cloud.steampowered.com/ugc/505764075446326572/BF2914456AF434A48ACEF3BD7683F1F7A6F1263B/, my shield is all blue. I have brought this down to the official HD texture pack as it only happens when it is activated. The elven shield model is the only one affected, as all other items still have the correct textures as far as I have seen.

Is this a known issue and/or is there a solution to this?

There seems to be two popular responses to blue textures.

1 - Your system is not powerful enough to handle HD textures. Time for an upgrade.

2 - You download is bugged or corrupted. Try verifying integrity first or download again from scratch.

I'm only now downloading this so I can't say for sure but those are the two things people are most likely to say.

Allright, the verify game integrity did it. 45mb of redownloaded files. Back to enjoying the game!