BlackRock Downgraded by UBS Over Growing ESG Investing Risks

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 stated.

Brennan Hawken, an analyst at the bank, downgraded the stock of BlackRock, Inc. (NYSE:BLK) from Buy to Neutral and slashed the stock price target from $700 to $585 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,” he said in a note, adding 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.”

According to Market Beat, the average analyst rating is a “Moderate Buy,” with a price target of $776.46.

But could 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 around, and regaining control of its corporate messaging.

BlackRock CEO Larry Fink speaks at a forum during the opening of the Clinton Global Initiative (CGI), a meeting of international leaders in New York City on Sept. 19, 2022. (Spencer Platt/Getty Images)

“The energy industry plays a crucial role in the economy, and, on behalf of our clients, BlackRock has invested $170 billion in U.S. public energy companies,” the company wrote. “We are also partnering with energy companies and start-ups to fund new technology and innovations that will power the global economy, now and in the future. Despite these investments, BlackRock has recently been accused of ‘boycotting’ oil and gas companies.”

The company offers a long list of ESG-focused exchange-traded funds (ETFs) that concentrate on climate change, data privacy, accounting practices, product liability, and ethics.

GOP Uninterested in ESG Investing

In recent weeks, a plethora of Republican officials have divested from BlackRock over its ESG policies.

Last week, Louisiana Treasurer John Schroder wrote a letter (pdf) to Fink, explaining that the state would liquidate approximately $800 million from the financial institution’s exchange-traded funds (ETFs), money market funds, and mutual funds within three months. Schroder cited BlackRock’s ESG standards that promote green energy over conventional fossil fuels.

“Your blatantly anti-fossil fuel policies would destroy Louisiana’s economy,” he said. “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.”

South Carolina announced on Monday that the state would be

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