INDIANA – A leading global investment management company — The Vanguard Group Inc. — has pledged in a settlement obtained by Attorney General Todd Rokita that it will not impinge on its customers’ profitability by imposing ESG goals that threaten to tank the coal industry and drive-up electricity prices.
ESG — an acronym standing for “environmental, social and governance” — refers to an investing principle that elevates goals like mitigating climate change, enforcing hiring quotas and achieving social justice benchmarks above the fiduciary duty to maximize returns for investors.
“For far too long, a few powerful corporate titans have worked against the interests of everyday Hoosiers by pursuing a senseless vendetta against the coal industry,” Attorney General Rokita said. “Coal has been the backbone of Indiana’s economic success for decades, and I appreciate Vanguard’s commitment to change course and take positive steps that benefit investors and consumers alike.”
The settlement, which also includes a commitment to empower investors with proxy voting, resolves allegations made against Vanguard in a Texas-led multistate lawsuit.
This complaint also includes as defendants two other asset managers — BlackRock and State Street. In a pending legal action, Attorney General Rokita and other attorneys general allege that these two companies continue to engage in anticompetitive schemes that hurt investors and U.S. energy companies.
Under the settlement, Vanguard has pledged it will not use its shareholdings to (a) direct its portfolio companies’ business strategies, (b) threaten its portfolio companies that it will withdraw from its holdings unless they agree to act (or not act) in some manner, or (c) nominate directors or shareholder proposals to its portfolio companies. Vanguard has also agreed to pay $29.5 million to the states.
In addition, Vanguard will offer proxy voting to investors in funds accounting for at least 50% percent of assets invested in U.S. equity funds it advises. This will ensure that Vanguard’s customers can make their voices known on portfolio companies’ business, including whether companies should maximize profitability over ESG or other goals.
