Two points: 1. The US isn't the problem; China and India are. 2. The US has done a great job reducing pollution. Yep, where already green. Skeptical. Spend a few minutes mins and watch below. Awesome review.
End Vanguard’s ESG Meddling With Utilities
The asset manager is violating its agreement with FERC and making America more dependent on China.
By Will Hild, WSJ
Dec. 1, 2022 6:47 pm ET
Americans are paying sky-high electricity rates and companies like Vanguard are making the problem worse. This week my organization, Consumers’ Research, joined 13 state attorneys general in a complaint against Vanguard at the Federal Energy Regulatory Commission. With more than $7 trillion in assets under management, the Pennsylvania-based investment firm has publicly committed to pressuring utilities to lower their emissions. 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.
The three biggest asset managers—Vanguard, State Street and BlackRock—wield enormous clout over the companies in their investment portfolios. That influence is primarily exercised in board meetings and elections. The big three can cast nearly 25% of the votes in any director election at S&P 500 companies. That leverage means CEOs listen when asset managers make demands.
Vanguard isn’t shy about doing so, and it has made climate its top priority. In March 2021 the company joined a group of other asset managers in the Net Zero Asset Managers Initiative—a U.N.-linked organization dedicated to transforming the global economy to reach net-zero carbon emissions. Before joining the initiative, each member must commit to implementing a “stewardship and engagement policy” consistent with “achieving global net zero emissions by 2050.” Asset managers like Vanguard then use their clients’ assets—not their own—to “accelerate the transition.”
Translation: They pressure companies through meetings and board votes.
Committing to net zero isn’t an abstract goal. The Net Zero Asset Managers Initiative requires its members to prescribe specific emissions targets for industry sectors, especially utilities. The International Energy Agency’s net-zero road map envisions eliminating fossil fuels from electricity generation by 2050. That would require every American utility to remake its operations radically.
Under FERC rules, asset managers aren’t permitted to meddle in a utility’s operations. Vanguard is aware of this; that’s why the company promised FERC at its August 2019 authorization hearing it would be a passive investor in the utilities in which it holds shares. The commission granted authorization, and Vanguard’s investment has been anything but passive, actively pushing corporate managements to pursue net-zero targets and shutter coal and natural-gas electricity generation.
Why would Vanguard join an outfit like the Net Zero Asset Managers Initiative and risk violating the law? It could leave net-zero decisions up to individual companies, none of which are required by law to reach such targets.
The answer may be that such asset managers have a major conflict of interest. These companies want to manage blue-state pension funds—say, for New York or California—which are some of the largest in the country. With control, however, come demands to push net-zero policy across their assets. Doing so effectively allows them to extend their environmental activism into other states.
On Sept. 21, New York City Comptroller Brad Lander sent a letter to BlackRock CEO Larry Fink—one of the city’s pension asset managers. In his letter, Mr. Lander details Blackrock’s net-zero commitments and cites IEA’s pathway toward zero fossil-fuel production. He then asks Mr. Fink to “provide a detailed approach to keeping fossil fuels reserves in the ground.” If Vanguard isn’t already under similar pressure from its own blue-state clients, it will be soon.
The consequences of such politicking could hardly be more severe. Consumers saw electricity prices rise 14% over the past 12 months. The rest of the country can’t afford to adopt the environmental policies of New York and California.
The push to net zero directly threatens U.S. energy security. As of 2021, China controls over 80% of manufacturing for solar panels and up to 70% for wind turbine components. Beijing also controls many of the key ingredients for renewable energy, especially rare-earth metals but also lithium, nickel and cobalt. The U.S. produces hardly any of these crucial materials.
FERC should investigate Vanguard’s activities to determine exactly what the asset manager has been telling utilities. The commission might also audit BlackRock’s compliance with the similar authorization it received in April. If these issues go ignored, consumers will continue to pay, both in higher energy prices and increased dependence on our adversaries. That’s a risk the U.S. can’t afford to take.
Mr. Hild is executive director of Consumers’ Research.