Bad news for Blackrock

 John Horvat II:

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The case of the BlackRock index fund is one example of misplaced ideological motives. The company has used its financial muscle to browbeat others into toeing ecological, social and governance (diversity) lines. However, BlackRock is now getting a taste of its own medicine. It is paying the penalty for insisting that others bow before the gods of “woke” culture.

Introducing the ESG Rating System

BlackRock is a major player in the latest Wall Street craze of using a rating system to decide who receives its massive supply of investment dollars. This new social credit scheme evaluates investment possibilities based on their compliance with environmental, social and governance (ESG) targets. A state (e.g., Utah), county, city, or company with a negative ESG rating can see itself choked off credit or investment capital.

On January 15, 2020, BlackRock founder and CEO Larry Fink sent a letter to CEOs saying that he will use its power to ensure “every government, company, and shareholder must confront climate change.”

The plight of these targeted companies is made worse by investment managers at index funds like BlackRock, who control vast numbers of shares. They can use the ESG ratings against corporate boards by promoting shareholder resolutions to force management to advance liberal social causes, eco-climate standards, and diversity employment goals. ESG eco-activists especially target fossil-fuel companies that are slated ideologically for extinction.  

BlackRock is the world’s largest asset manager, with index funds worth $10 trillion. With Vanguard and State Street -- all under “woke” management -- Blackrock has been using its massive financial muscle to steer Wall Street down disastrous ideological paths.

A Boomerang for Blackrock

Wall Street and investors are pushing back.

Analysts are saying that making financial decisions on ideology is a risky affair. It cannot be sustained and left unpunished.

BlackRock’s energetic focus on ESG investing is affecting its bottom line. The index fund’s performance is deteriorating, and risks are accumulating. In the face of this situation, UBS Wealth Management recently downgraded ratings for BlackRock (NYSE: BLK) by now listing it as a “Neutral” recommendation rather than a “Buy.” The bank also cut the target stock price to $585 from $700.

The new recommendations were made based entirely on BlackRock’s reckless ESG positioning. UBS says that stubborn insistence on this course could also trigger increased regulatory inspections and investor withdrawals.

Thus, the company pressuring countless firms to adopt more “woke” positions has suddenly found a boomerang coming in its direction. Investors and analysts are now telling BlackRock that ESG shenanigans are bad business and want it stopped.

Feeling the pressure, BlackRock has posted “clarifications” on its website that seek to dispel the idea that it has boycotted fossil fuel investments entirely by highlighting some special funds that feature them. Nevertheless, the firm continues offering a list of other funds that exclude fossil fuels. It still supports shareholder resolutions that promote the ESG agenda.

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I think Big Green is wrong about many things and one of them is its hostility to fossil fuels.  Green energy is incapable of providing more than a fraction of the energy needed in the US for commerce and homeowners.  Going full Big Green would be an economic disaster and make life much worse for Americans.