Vanguard will no longer participate in the Net Zero Asset Managers initiative as lawmakers and the broader marketplace scrutinize the company’s support of the environmental, social, and governance movement, also known as ESG.
Signatories of the Net Zero Asset Managers initiative promise to move portfolio companies closer to eliminating net carbon emissions by 2050 or sooner. Vanguard will withdraw from the initiative to “provide the clarity our investors desire about the role of index funds and about how we think about material risks, including climate-related risks,” according to a statement.
The move occurred hours after officials in the state of Texas announced a hearing over asset managers’ purported mismanagement of taxpayer dollars driven by ideological motives. Last week, multiple attorneys general filed motions with the Federal Energy Regulatory Commission seeking to prevent Vanguard from purchasing shares in publicly traded utilities out of a concern that the company’s climate efforts would raise energy prices and decrease grid reliability.
“Vanguard realized their entire business model could be at stake if they didn’t stop coordinating with other members to drive up energy costs,” Consumers’ Research Executive Director Will Hild, whose organization also filed a motion with the agency, remarked in a statement provided to The Daily Wire. “We’ve struck a serious blow to the anti-consumer ESG agenda and we are going to keep fighting until these asset managers and banks get back to fulfilling their fiduciary duties and stop playing politics with other people’s money.”
A number of Republican state governments have recently divested from prominent asset managers over concerns that the companies’ voting priorities are driven by political ideology rather than the maximization of returns. Following divestments from South Carolina, Louisiana, Missouri, West Virginia, and Utah, the state of Florida revealed plans last week to remove $2 billion from BlackRock next year.
There exists evidence of a broader market backlash against asset managers’ leverage of proxy voting to advance executives’ preferred social and political views. An exclusive poll from The Daily Wire showed earlier this year that 64% of respondents believe “individual investors whose savings are being invested” should decide whether retirement and pension funds are allocated according to ESG standards, while 20% believe that “Wall Street asset managers” should make such decisions.
As the debate over the ESG movement continues to make headlines, BlackRock CEO Larry Fink announced last month that institutional clients would be able to vote their own shares rather than allow the company to act as a proxy. “It’s clear there are investors who don’t want to sit on the sidelines; they have a view on corporate governance, and they want a meaningful way to express those views,” the executive said.
Despite its dissociation from the Net Zero Asset Managers initiative, Vanguard affirmed that the move “will not affect our commitment to helping our investors navigate the risks that climate change can pose to their long-term returns.” The company manages $7 trillion in assets.
“Climate change, and the ongoing global response, will have far-reaching economic consequences for companies, financial markets, and investors, presenting a clear example of a material and multifaceted financial risk,” the statement continued. “Vanguard has been taking steps to understand and attend to this risk to investors’ returns, including through our engagements with portfolio companies, policymakers, and broader industry efforts.”