BlackRock’s focus on Environmental, Social and Governance (ESG) investing, which has recently been all the rage on Wall Street, is a dangerous move for the world’s largest asset manager, UBS analysts recently said. .
Analyst Brennan Hawken at the bank cut BlackRock’s (NYSE:BLK) stock price from “buy” to “neutral,” citing a growing backlash against its ESG efforts as a price target. Reduced from $700 to $585.
“Based on environmental pressures on earnings and risks from the company’s ESG position, we are downgrading BLK to neutral,” he said in a note, noting that BlackRock is facing increased regulatory scrutiny and a possible reduction in its fund management operations. He added that he could face
“BLK’s early and vigorous adoption of ESG principles in its fund management and shareholder proxy activities has positioned it as an ESG leader in our view. We believe there has been a recent increase in potential loss of fund mandates and regulatory scrutiny as the risks have increased.”
According to Market Beat, the average analyst rating is “moderate buy” with a target price of $776.46.
But can CEO Larry Fink watch the Wall Street giant come under pressure over sustainable investments?
BlackRock recently launched a new web page focused on “setting the record straight” on ESG investing, dispelling some of the most widespread misconceptions and taking back control of corporate messaging.
BlackRock CEO Larry Fink speaks at the forum during the opening ceremony of the Clinton Global Initiative (CGI), an international leadership conference in New York City on September 19, 2022. (Spencer Platt/Getty Images)“The energy industry plays a key role in the economy and BlackRock invested $170 billion in US public energy companies on behalf of our clients,” the company wrote. “We also partner with energy companies and start-ups to fund new technologies and innovations that will power the global economy now and in the future. It has been accused of “boycotting” oil and gas companies. ”
The company offers a long list of ESG-focused exchange-traded funds (ETFs) with emphasis on climate change, data privacy, accounting practices, product liability, and ethics.
Republicans are indifferent to ESG investing
In recent weeks, a number of Republican officials have pulled out of BlackRock over its ESG policies.
Last week, Louisiana State Treasury Secretary John Schroeder wrote Fink a letter (pdf) stating that the state is investing about $800 million from financial institutions’ exchange-traded funds (ETFs), money market funds, and mutual funds. He said it would be settled within a month. Schroder cited his ESG criteria for his BlackRock, which promotes green energy over conventional fossil fuels.
“A blatant anti-fossil fuel policy would destroy the Louisiana economy,” he said. “This sale is necessary to protect Louisiana from actions and policies that actively seek to sabotage the fossil fuel sector. It is inconsistent with public interests and values.I cannot support an institution that denies the interests of one of the state’s most powerful assets.”
South Carolina announced Monday that it will sell about $200 million of BlackRock’s holdings by the end of the year.
“I will not allow my 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 resist pressure to align with their left-wing worldview,” said treasurer Curtis Loftis.
Other US jurisdictions, including Arkansas, Utah and West Virginia, have begun selling tens of millions of dollars in state money from BlackRock. In August, Texas and 18 other states sent Fink a letter threatening to remove state funds from those banks over his ESG goals for BlackRock.
“Our state will not unnecessarily support pensioner retirees being sacrificed for BlackRock’s climate policies. It’s time for BlackRock to clarify whether it’s evaluating current and future retirees or risking more significant losses than those caused by BlackRock’s bizarre climate agenda. ‘ said the letter.
In an op-ed on the Fox Business Network website, Nebraska Treasurer John Murante argued that BlackRock and other asset managers have “lost faith in ESG investing.”
“Wall Street companies market themselves by referencing a solid object, a black rock. Either maximize ESG or drive ESG and net zero, you can’t have both,” said Murante.
Florida did not target BlackRock, but Governor Ron DeSantis and the Board of Governors of the State Board of Management (SBA) approved action to remove ESG criteria from the $186 billion state pension fund.
“Increasingly harnessing the power of corporations by bending financial investment priorities under the euphemistic banner of environmental, social, corporate governance, diversity, inclusion and equity,” the governor said in a statement. “It’s starting to impose an ideological agenda on the American people.” In August.
But BlackRock isn’t the only Republican-led state pulling out for so-called responsible investments. For example, West Virginia announced that other financial institutions, including Goldman Sachs, JP Morgan Chase, Morgan Stanley and Wells Fargo, would not be covered by the state’s banking agreement.
Despite pushback from many Republican-led states, a recent report by PricewaterhouseCoopers claims demand for ESG investing is outstripping supply. The survey found that nearly 90% of his institutional investors believe asset managers should be more active in manufacturing new his ESG products. Additionally, nearly 80% of his US investors plan to increase their allocation to ESG financial instruments over the next two years.
BlackRock shares fell about 2.7% on Friday to below $551. Since the beginning of the year, the company has lost 40% of its market value, or about $55 billion.
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Andrew Moran has been writing about business, economics and finance for over a decade. He is the author of “The War on Cash”.
