BlackRock Admits Its Bottom Line Could Be Hurt By ESG Investing

 Financial asset manager BlackRock said in its annual report that environmental, social, and governance policies could hurt its bottom line after Republican state officials cut ties with the company over its ties to China and climate activism. 

In its annual Form 10-K SEC filing put out last week, BlackRock said that it was facing ESG-related risk factors that might cause it to lose revenue and damage its earnings. The financial giant, which has over $10 trillion in assets, has faced scrutiny from Republican officials who say the company misleads its customers about leftist policies. 

“If BlackRock is not able to successfully manage ESG-related expectations across varied stakeholder interests, it may adversely affect BlackRock’s reputation, ability to attract and retain clients, employees, shareholders and business partners or result in litigation, legal or governmental action, which may cause its AUM, revenue and earnings to decline,” the company wrote in its filing. 

The company said that this was due to having “clients who have a variety of goals and preferences, including those who want to increase their exposure to the low-carbon transition and those who choose not to invest in products or strategies with sustainable investment objectives.”

BlackRock said that there was risk because some of its clients wanted it to become more involved in promoting ESG investing, while others have cut off business because of its policies toward coal and natural gas. 

“Some US states and state officials have adopted or proposed legislation or otherwise have taken official positions restricting or prohibiting state government entities from doing certain business with entities identified by the state as ‘boycotting’ or ‘discriminating’ against particular industries or considering ESG factors in their investment processes and proxy voting,” the filing said. “Other states and localities may adopt similar legislation or other ESG-related laws and positions that adversely impact BlackRock’s business.”

The filing was cheered on by conservatives who said that it was only the beginning of pushback on ESG initiatives.

“The hustlers & radicals pushing ESG on American investors & retirees are finally being exposed. But the battle is far from over because they are going to change tactics & try to fly under the radar. Our policy responses will need to evolve,” Sen. Marco Rubio (R-FL) said.

 

In recent years, a number of states, including Louisiana and West Virginia, have divested from BlackRock. As opposition grew, the company has backtracked on some of its policies, most recently pulling out of Climate Action 100+, a group that pressures companies to “take action on climate change.” BlackRock International, a subsidiary, remained in the group.

Republican officials have also maintained pressure on the company, and 15 Republican attorneys general, led by Montana Attorney General Austin Knudsen, demanded more answers from BlackRock about its participation in climate organizations and what kind of environmental, social, and governance policies it has implemented.