Consumers’ Research and attorneys general from 13 states filed separate motions with the Federal Energy Regulatory Commission (FERC) to stop institutional investor Vanguard from receiving authorization to purchase shares in publicly traded utilities. FERC’s mission is to ensure reliable, safe, secure, and economically efficient energy for American consumers at a reasonable cost. According to Will Hild, executive director of Consumers’ Research, the parties are asking the agency to live up to its mission by preventing concentrations of power over the energy grid.
Collectively, the top three asset managers, Vanguard, BlackRock, and State Street, hold the largest voting blocs for most S&P 500 companies with a combined $300 billion fossil-fuel investment portfolio. This consolidation allows them to bypass elected representatives and shape American energy policy without considering impacts on the American consumer. Special authorization from FERC is required when these firms attempt to invest in publicly traded utilities over a certain threshold. Vanguard is up for review this year, and BlackRock is up in 2025.
While Vanguard and the other asset managers may assert that they are passive investors, the motion from Consumers’ Research tells a different story.
Here, Vanguard promises that it does not control or manage its portfolio companies, that it has no hand in their day-to-day activities, and that its ownership does not affect electricity rates, but its radical environmental, social, and corporate governance agenda tells a different story. In its own words, Vanguard takes a “results-oriented” approach to engaging its portfolio companies.5 That includes pushing for leadership changes, voting on shareholder proposals, and demanding compliance with Vanguard’s “expectations” on political projects “such as climate change or diversity.”
Vanguard, BlackRock, and State Street belong to the Net Zero Asset Managers Initiative. The commitment made by participants states:
In line with the best available science on the impacts of climate change, we acknowledge that there is an urgent need to accelerate the transition towards global net zero emissions and for asset managers to play our part to help deliver the goals of the Paris Agreement and ensure a just transition.
In this context, my organisation commits to support the goal of net zero greenhouse gas (‘GHG’) emissions by 2050, in line with global efforts to limit warming to 1.5°C (‘net zero emissions by 2050 or sooner’). It also commits to support investing aligned with net zero emissions by 2050 or sooner.
Vanguard’s membership in this organization is in direct opposition to its assertion that it is a passive investor. After joining the group, U.S. News reported that Vanguard said it would engage with companies over their climate plans and commitments. It makes sense since members pledge to “Prioritise the achievement of real economy emissions reductions within the sectors and companies in which we invest.” The company also voted against Exxon Mobil and helped to install three activist investors from the hedge fund Engine No. 1 to the oil and gas company’s board.
BlackRock CEO Larry Fink is even more upfront about his firm’s activism. On one panel about environmental, social, and governance or ESG investing, he said, “Behaviors are going to have to change, and this is one thing we are asking companies. You have to force behaviors, and at BlackRock, we are forcing behaviors.” Vanguard and BlackRock use other people’s money in employer-sponsored pensions and retirement funds to push this woke agenda. And when investing in public utilities, they are “forcing behaviors” on the energy grid.
What happens when public utilities are “forced” to change how they generate energy? The 2021 winter blackout in Texas is one good example. “Over-reliance on intermittent wind and solar energy is what we are trying to prevent,” said Hild. “We took this action on behalf of American energy consumers because time and time again, we see massive wall street firms pretending to ‘passively’ manage their shares. Instead, they use those assets to bully utility companies into adopting radical left-wing policies that drive up electric bills and risk the stability of our power grid. Affordable, reliable energy production is the foundation of America’s economy and the quality of life we enjoy.”
Attorneys general in Utah, Indiana, Alabama, Arkansas, Kentucky, Louisiana, Mississippi, Montana, Nebraska, Ohio, South Carolina, South Dakota, and Texas filed a separate motion asking FEC to review Vanguard’s application. According to their motion, in 2019, Vanguard said it would refrain from investing “for the purpose of managing” utility companies. The asset manager also guaranteed that it would not seek to “exercise any control over the day-to-day management” of utility companies nor take any action “affecting the prices at which power is transmitted or sold.” The motion alleges that now Vanguard’s public commitments have created the appearance that Vanguard is engaging in environmental activism and using its financial influence to manipulate the activities of the utility companies in its portfolio. This would be a breach of its assurances to FERC in 2019.
Kentucky Attorney General Daniel Cameron added, “Consumers across our country are already feeling the sting of skyrocketing electricity bills, and Vanguard’s request to extend its authorization, coupled with its commitment to imposing net-zero requirements on publicly traded utilities, would only increase these costs. Kentuckians and Americans deserve access to affordable and reliable utilities, and we will oppose any effort that will undermine Kentucky’s economy, destroy good paying jobs, and make it harder for Kentuckians to heat their homes and feed their families.”
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