AMAC Exclusive – By Shane Harris
Last week, the mammoth investment bank Vanguard – which manages some $7 trillion in assets – shocked the finance world by announcing that it would be pulling out of an industry-wide initiative ostensibly aimed at combatting climate change known as Net Zero Asset Managers (NZAM). The move was the latest major blow to proponents of “environmental, social, and governance” (ESG) investing, and another indicator that the left’s grip on the world of corporate finance and big banking may be beginning to slip.
Prior to Vanguard withdrawing from NZAM, the initiative, which was just launched in late 2020, boasted 291 signatories representing $66 trillion in assets. Signatories commit to “supporting the goal of net zero greenhouse gas emissions by 2050 or sooner.” In practice, this means divesting from fossil fuels companies and only investing in corporations that embrace the far left’s climate agenda.
As recently as May, Vanguard was touting its commitment to NZAM’s goals, pledging that $290 billion of its assets would be “net-zero” by 2050. But in a statement last week, the firm said that it was withdrawing from the initiative to “make clear that Vanguard speaks independently on matters of importance to our investors,” and “provide the clarity our investors desire about the role of index funds and about how we think about material risks.”
On the same day that Vanguard announced it was withdrawing from NZAM, news also dropped that the Texas state legislature has subpoenaed BlackRock, another investment giant, over the institution’s ESG policies. Texas state Senator Bryan Hughes filed the subpoena and said he is seeking in-person testimony from BlackRock CEO Larry Fink, who has garnered a reputation as one of the leading proponents of ESG investing and woke corporate policies. “We will not allow these firms to continue to use Texans’ money to force a narrow political agenda,” Hughes said in a statement.
Elected officials in other states have also sought to hold woke investment banks accountable for what they argue is a violation of shareholders’ fiduciary interests. Many states have billions of dollars invested with institutions like BlackRock and Vanguard through public employee pension plans as well as general state funds.
West Virginia State Treasurer Riley Moore was one of the first to take action in January of this year when he dumped BlackRock over the firm’s ESG policies, withdrawing some $20 million in state funds. Then, in July, Moore announced that the state would no longer do business with five major financial institutions, including Goldman Sachs and JP Morgan, due to those institutions’ hardline stance against West Virginia’s all-important coal industry.
Moore’s actions helped touch off a series of similar moves from Republican officials in other states. A legal opinion from Kentucky Attorney General Daniel Cameron in May of this year decried ESG investing as a way for bank executives to “push their own political agendas and force social change.”
A few months later, a group of 19 GOP state attorneys general penned a letter to Fink accusing BlackRock of using “the hard-earned money of our states’ citizens to circumvent the best possible return on investment.” The letter specifically outlines several ways in which BlackRock’s ESG policies may be in violation of numerous state laws on maximizing financial return to investors, while also raising antitrust concerns.
Then, in early December, Florida delivered one of the biggest blows to ESG investing when the state removed $2 billion worth of assets managed by BlackRock. Florida CFO Jimmy Patronis said in a statement at the time that “I need partners within the financial services industry who are as committed to the bottom line as we are – and I don’t trust BlackRock’s ability to deliver.” The move was made possible by a resolution pushed through in August by Governor Ron DeSantis which officially eliminated ESG considerations from state pension investments.
Investment banks that have embraced ESG have also faced pressure from congressional Republicans to back down from their social engineering schemes.
Just days before Vanguard announced it was withdrawing from NZAM, Congressman Jim Jordan of Ohio, the ranking member on the House Judiciary Committee, announced an investigation into whether or not investment banks acting collectively in the name of ESG are violating antitrust laws.
In November, a group of five Senate Republicans also sent letters to dozens of prominent law firms employed by investment banks notifying them that they have “a duty to fully inform clients of the risks they incur by participating in climate cartels and other ill-advised ESG schemes,” again hinting at potential antitrust violations. With a new GOP House majority set to take power next month, ESG investing could be a top target for congressional investigations, and may lead to outside lawsuits on antitrust grounds.
It seems clear that all of these pressures played at least some role in Vanguard backing down from its embrace of ESG last week. Though there is still a long way to go toward breaking the stranglehold that the left has on banking and the corporate world in general, conservatives – and everyone who doesn’t want left-wing activists to decide how their money is invested – can take heart in that they finally seem to have some momentum.
Shane Harris is a writer and political consultant from Southwest Ohio. You can follow him on Twitter @Shane_Harris_.