UBS downgrades BlackRock over ESG investing risks (2022)

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.”…

Despite the pushback from a whole host of Republican-led states, a recent report from PricewaterhouseCoopers argued that the demand for ESG investments outstrips supply. The study learned that nearly 90 percent of institutional investors think asset managers should be more proactive in manufacturing new ESG products. Additionally, close to 80 percent of American investors plan to bolster their allocations to ESG financial products over the next two years.

BlackRock shares were down about 2.7 percent on Friday to trade below $551. Since the beginning of the year, the firm has lost 40 percent of its market value.^[2]