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Vanguard Pulls out of Net Zero Climate Effort to Make Clear It ‘Speaks Independently’

Vanguard announced Wednesday it is pulling out of the Net Zero Asset Managers initiative, an investment-industry effort to encourage fund firms to reach net zero emission targets by 2050.

“We have decided to withdraw from NZAM so that we can provide the clarity our investors desire about the role of index funds and about how we think about material risks, including climate-related risks—and to make clear that Vanguard speaks independently on matters of importance to our investors,” Vanguard said in a statement.

Vanguard, the world’s top mutual fund manager, said the change “will not affect our commitment to helping our investors navigate the risks that climate change can pose to their long-term returns.”

The change of heart comes roughly a week after Consumers’ Research and 13 state attorneys general asked the Federal Energy Regulatory Commission to review Vanguard’s request to own energy company stocks. 

“Americans are paying sky-high electricity rates and companies like Vanguard are making the problem worse,” Will Hild, executive director of Consumers’ Research, wrote in an op-ed for the Wall Street Journal.

With more than $7 trillion in assets under management, the Pennsylvania-based investment firm has publicly committed to pressuring utilities to lower their emissions,” Hild added. “Vanguard appears to be not only putting America’s critical infrastructure at risk but violating its agreement only to control utility company shares passively. To protect U.S. consumers and safeguard national security, FERC should investigate the company’s conduct.”

Hild responded to Vanguard’s announcement in a statement on Wednesday, saying the decision “proves what we’ve been saying from the beginning, this is a conspiracy against the consumer.”

“Soon after we filed to intervene in their authorization renewal before the FERC, Vanguard realized their entire business model could be at stake if they didn’t stop coordinating with other members to drive up energy costs,” Hild said in a statement. “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.”

The Net Zero Asset Managers initiative launched in late 2020 and has added at least 291 signatories representing at least $66 trillion in assets under management.

“It is unfortunate that political pressure is impacting this crucial economic imperative and attempting to block companies from effectively managing risks — a crucial part of their fiduciary duty,” said Kirsten Snow Spalding, a vice president at sustainability nonprofit Ceres and a NZAM founding partner.

Meanwhile, the Texas Senate Committee on State Affairs will hold a hearing on December 15 to discuss the impacts of environmental social governance (ESG) policies on state pensions. The panel has asked Vanguard, BlackRock, StateStreet and ISS to appear and answer questions about their ESG practices. Texas previously asked the four firms to turn over documents in August. The Lone Star state had subpoenaed BlackRock to provide additional documents in person after the firm failed to comply with certain aspects of the initial request.

Republican Texas state senator Bryan Hughes said in a statement that the committee needs the request documents “to uncover the extent to which these firms have been playing politics using Texans’ hard earned money.”

“Next week we will hold a hearing where each firm will appear and give account to the people of Texas,” he added. “While each firm has produced documents, some have provided more than others. BlackRock in particular has refused to provide documents it considers internal or confidential.”

“We will not allow these firms to continue to use Texans’ money to force a narrow political agenda,” Hughes said. “They have a legal duty to put their investors’ interests first, and we intend to make sure they do.”

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