Since the beginning of the year, Republican politicians in the US have been ramping up their anti-ESG messaging.

The strategy started gaining real attention in May after former Vice President Mike Pence criticized investor-activist campaigns aimed at forcing fossil-fuel giant Exxon Mobil Corp. to follow socially conscious investing principles. The potential 2024 presidential candidate said they elevate “left-wing” goals over the interests of businesses.

Pence’s position has received support from numerous other Republicans, including far-right governors of two of the biggest states—Greg Abbott of Texas and Ron DeSantis of Florida—who have threatened to take state business away from corporations that support initiatives or regulations aimed at fighting things like global warming.

While the long-term financial ramifications of this anti-ESG drumbeat are likely de minimis for banks and asset managers, the political campaign is showing signs of having some impact right now. This month, Republican-controlled states Louisiana and Missouri pulled a combined $1.3 billion from BlackRock Inc., the world’s largest money manager, citing concerns about its adherence to ESG principles.

In all, nineteen attorneys general from states largely with GOP-dominated governments, including Arizona, Kentucky and West Virginia, have lashed out at BlackRock for pursuing a “climate agenda” at odds, they allege, with generating returns for state pensions. (Never mind that numerous studies show ESG investing to be financially advantageous to investors.)

Still, market watchers are following the lead of GOP politicians. Analysts at UBS AG downgraded BlackRock to “neutral” from “buy” earlier this month, partly it said because of risks from the firm’s “ESG positioning.” The analysts wrote that BlackRock’s “early and energetic” portrayal of itself as a champion of environmental, social and governance principles in fund management made the firm a political target.

At the same time, BlackRock, like all asset managers, is being hurt by the biggest stock market losses since the financial crisis of 2008 amid rising interest rates and Russia’s war on Ukraine. The latter has helped push up gasoline prices globally and drive inflation to an almost 40-year high in the US.

Given this market backdrop and the growing politicization of ESG by the right, the UBS analysts contend BlackRock faces the potential for lost fund mandates and heightened regulatory scrutiny. The Swiss bank reduced its earnings estimates for BlackRock and lowered its 12-month price target for the company’s stock to $585 from $700. BlackRock shares rose $14.18 to close at $611.44 Monday in New York.

After Missouri announced last week that it was withdrawing $500 million of pension assets from BlackRock, the New York-based firm issued a  statement saying that “while the actions of some elected officials have attracted media headlines, they don’t reflect the totality of our clients’ investment decisions.”

For example, BlackRock has attracted $248 billion of net new long-term assets this year, including $84 billion in the third quarter. “We remain committed to offering our clients choice and delivering them the best financial outcomes consistent with their preferences,” the company said.

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