After BlackRock went all-in for Environment, Social, and Governance (ESG) advocacy in investing, it appears the world’s financial asset manager is now suffering the consequences for embracing stakeholder capitalism.
On October 11th, UBS, a Switzerland-based multinational investment bank and financial services company, changed BlackRock’s rating from Buy to Neutral citing the risky nature and low returns characteristic of ESG funds.
In addition to downgrading its stock, UBS analyst Brennan Hawken also lowered the price target to $585 from $700—indicating a weakening bond market for the troubled company. Hawken similarly noted 61% of BlackRock’s active assets are fixed income.
BlackRock is paying for its sin of recklessly pushing ESG. As I noted here at IWF, BlackRock selectively applies its climate investment strategy here and abroad:
Black Rock is keen on “forcing behaviors” in the United States relating to sustainability risks, especially net-zero policies, but is reluctant to hold the world’s biggest polluter, China, accountable by judging them on the same strident standards. Thereby, being in clear violation of its fiduciary duty.
Why is that? As of February 2022, BlackRock was revealed to be a major investor in PetroChina— a state-owned oil and gas company under the purview of the China National Petroleum Corporation. It owns a 5.7% stake in the CCP-backed company.
Given the toxicity and nonviability of these woke funds, even CEO Larry Fink —who famously said his company forces behaviors, including ESG, on its investors—appears to be withdrawing from financially-focused climate activism.
Fink and CitiBank CEO Jane Fraser announced they won’t be appearing at the upcoming COP27 in Egypt. Their absence at this year’s conference puts net-zero climate pledges, which are paramount to ESG, into serious question.
Even chief financial officers are openly rebuking ESG funds.
A recent CNBC CFO Council Survey found that 55% of CFOs oppose the proposed Security and Exchange Commission (SEC) proposed Scope 3 rules and 45% of respondents supported Republican governors banning ESG considerations in state pension funds.
Financial asset managers would be wise to not follow in BlackRock’s footsteps and, instead, wholly reject this pernicious investment philosophy from infecting the financial sector.