Vanguard, the world's second-largest asset manager, announced on Wednesday that it was leaving the Net-Zero Asset Managers (NZAM) initiative, a group of financial institutions that support investments aimed at reducing global carbon emissions.
The move came after several Republican attorneys general called on the Federal Energy Regulatory Commission (FERC) to prevent Vanguard from purchasing publicly traded utilities due to the firm's previous climate commitments.
“Vanguard’s decision to leave the Net-Zero Asset Managers initiative is a victory for the retirement accounts of hard-working Kentuckians and the energy needs of our Commonwealth,” Kentucky Attorney General Daniel Cameron stated. “This is an important step toward stopping ESG driven policies that endanger Kentucky’s economy and threaten the availability of affordable and reliable electricity.”
In legal documents, the attorneys general claimed that Vanguard had colluded with other asset managers via NZAM and had pressured utilities to reduce fossil fuel use, which would have violated federal law, the Daily Caller reported.
Vanguard is now withdrawing from NZAM in order to prove to investors that it makes climate-related investing decisions independently and does not want to restrict its investment options.
According to a company press release, Vanguard has announced its withdrawal from the Net-Zero Asset Managers (NZAM) initiative in order to show investors that it makes climate-related investment decisions independently and does not want to limit its investment options.
Over 290 companies, including asset manager BlackRock, are members of NZAM, which manages $66 trillion in assets and aims to achieve "net-zero" carbon emissions by 2050.
According to Reuters, in May, Vanguard pledged to invest $290 billion in companies that have promised to produce "net-zero" carbon emissions by 2050. The company manages roughly $7 trillion in assets.
Previously, Republican attorneys general argued that Vanguard's commitments to environmental, social, and corporate governance (ESG) investing violated the company's previous promises to FERC, in which it said it would not exercise control over the companies or affect electricity prices. They also claimed that Vanguard's climate commitments could force utilities to shut down coal or natural gas-producing facilities early, leading to higher electricity prices.