BlackRock’s focus on the latest Wall Street craze—environmental, social, and governance (ESG) investing—has turned into a risky affair for the world’s largest asset manager, a UBS analyst recently said.
Brennan Hawken, an analyst at the bank, downgraded the stock of BlackRock (NYSE: BLK) to Neutral from Buy and slashed the stock price target to $585 from $700 over growing pushback to its ESG efforts.
“We are downgrading BLK to Neutral based on environmental pressure to earnings and risk from the firm’s ESG positioning,” Hawken wrote in a note, stating that BlackRock could face increased regulatory inspection and the possibility of diminished fund management business.
“BLK’s early and energetic adoption of ESG principles in its fund management and shareholder proxy activities have positioned the firm as an ESG leader in our view. However, as performance deteriorates and political risk from ESG has increased, we believe the potential for lost fund mandates and regulatory scrutiny has recently increased.”
But could BlackRock CEO Larry Fink witness the Wall Street titan come under pressure over sustainable investing?
BlackRock recently launched a new webpage with a focus on “setting the record straight” on its ESG investments, dispelling some of the misconceptions being spread and regaining control of its corporate messaging.
Republicans Uninterested in ESG InvestingIn recent weeks, a plethora of Republican officials have divested from BlackRock over its ESG policies.
“Your blatantly anti-fossil fuel policies would destroy Louisiana’s economy,” Schroder wrote. “This divestment is necessary to protect Louisiana from actions and policies that would actively seek to hamstring our fossil fuel sector. In my opinion, your support of ESG investing is inconsistent with the best economic interests and values of Louisiana. I cannot support an institution that would deny our state the benefit of one of its most robust assets.”
“I will not allow our financial partners to undermine my fiduciary responsibility to maximize investment returns while accepting a prudent level of risk for the benefit of our citizens. It is imperative that we stand up to BlackRock and resist the pressure to simply fall into line with their leftist worldview,” South Carolina Treasurer Curtis Loftis explained.
“Our states will not idly stand for our pensioners’ retirements to be sacrificed for BlackRock’s climate agenda. The time has come for BlackRock to come clean on whether it actually values our states’ most valuable stakeholders, our current and future retirees, or risk losses even more significant than those caused by BlackRock’s quixotic climate agenda,” the letter reads.
“Wall Street firms market themselves by referencing solid objects—a black rock. For firms making ESG commitments, the appropriate image would be a black box. Asset managers cannot have it both ways: either they maximize financial returns, or they push ESG and net zero,” he wrote.
While Florida didn’t specify BlackRock, Florida Gov. Ron DeSantis and trustees of the State Board of Administration (SBA) approved a measure to remove ESG criteria from $186 billion in state pension funds.
But it isn’t only BlackRock that Republican-led states are divesting from because of so-called responsible investing. West Virginia announced that other financial institutions would be ineligible for state banking contracts, such as Goldman Sachs, JPMorgan Chase, Morgan Stanley, and Wells Fargo.
BlackRock shares fell about 2.7 percent on Oct. 14, to close below $551. Since the beginning of the year, the firm has lost 40 percent of its market value, or about $55 billion.