Vanguard Backs Away from ESG Investing

Some companies, BlackRock is one, have been barred by some states, from doing certain business with the state governments, because of their “woke” policies. For publicly held companies, it would seem their fiduciary duty would be to avoid policies that would draw government sanctions, hence back away from ESG investing, regardless whether it is the right thing to do, or not.

1 Like

My previous company has now basically shut down its ESG data platform unit in Analytics, laid everyone off except an incompetent IT SVP, some portion of a way-overstaffed and careening “product unit” and a few developers. They can’t sell the data, suddenly 3 years after tens of millions in acquisitions and more tens of millions in annual spend, no one is really interested in seeing the data by company, OR in going through the machinations & reporting required to provide the metrics to ratings companies like this one. (Moo dees.)

1 Like

I wonder what Jack Bogle would think of the Vanguard Personal Advisor service with the 0.30% of assets annual fee? Vanguard is no longer the absolute low fee leader – you can often get a lower fee elsewhere.

intercst

When Charles dies who knows what happens to Schwab.

Seems that, when the founder goes toes up, most companies are handed over to “professional management”, which is more concerned with lining their own pockets, than nurturing the company. Was it once or twice, that Messrs Hewlett and Packard had to go back to HP and clean up the operation, after “professional management” had made a haggis of the company?

Steve…made money off of Carley’s building offices all over the place, and made more money when HP booted Carley, and closed all those offices.

1 Like

Another blow to ESG – $17 trillion

An ESG Asset Manager Exodus
https://www.wsj.com/articles/climate-action-100-exodus-j-p-morgan-state-street-blackrock-esg-investing-b78d2a06
Has the tide turned on environmental, social and governance (ESG) investing? It appears so. JPMorgan Asset Management, BlackRock and State Street Global Advisors on Thursday retreated from the Climate Action 100+ investor compact because they don’t want the political and legal liability.

Climate Action 100+ describes itself as the “largest ever global investor engagement initiative on climate change.” Its 700 or so institutional investor members manage more than $68 trillion in assets (before Thursday’s exits). Their goal is to force companies to zero out CO2 emissions by 2050.

Members are supposed to “engage” 170 “focus companies” such as Boeing, Home Depot and American Airlines—that is, threaten to vote against non-compliant corporate directors and back shareholder resolutions that pressure management. Their campaign has had great success with 75% of targeted companies committing to “net zero.” But the climate left is never content…

The climate alliance’s new rules would compound the legal and political jeopardy. In its withdrawal announcement, State Street said its rules “are not consistent with our independent approach to proxy voting and portfolio company engagement.” BlackRock said the rules “would raise legal considerations.”

DB2

2 Likes

We have been discussing this for a while. State governments, like W Va, boycott the investment companies because of their stand supporting ESG principles. ESG seems to have been made as politically poison as the CEO of a company being an open COMMIE!!! in the 50s.

So, how do the investment companies prove they are “innocent” of supporting ESG principles? Be openly in favor of corrupt, self-dealing, heavily interest-conflicted, management?

Steve

2 Likes

Either BlackRock and the others are working to maximize state pension funds or they aren’t – no mixed motives are allowed. There is a fiduciary duty.

There is also the question of antitrust. If a group of investment companies coordinate actions through Climate Action 100+, it would seem they could be open to antitrust investigations.

DB2

1 Like

I understand that. It is the policy positions the states are forcing on the companies, as a condition of doing business with the state. The states are acting like requiring “good governance” in a company, to qualify for investment, is a bad thing.

Of course, the next thing is to require the investment companies to shun every corporation that even hints at following ESG principles.

Where would that leave USian corporations? As suggested, they would need to “prove” they are not following ESG principles. Racist/sexist HR policies would be required? Corrupt, interest-conflicted, management would be required? The sort of gutting of a company to enrich current management, that we have seen at Boeing, would be required?

Steve

4 Likes

States imposing NOT maximizing profits for retirement plans under management would be a breach of their fiduciary responsibilities. That would make those (now former) state officials ineligible to serve in govt at any level as a result of their criminal action(s).

Plus, any business that breaks their fiduciary responsibility should be banned from managing ANY govt fund for at least the next 10 yrs.

There was a push, several years ago, to hold investment advisors for retirement accounts to a fiduciary standard. Of course, the investment advisor community was shocked and horrified at the prospect of being forced to put their client’s interests ahead of their own. The advisor community won.

As offered here before, in other contexts, folks like you and me are nothing but ledger entries under “sources of funds”.

The Department of Labor (DOL) fiduciary rule, was originally scheduled to be phased in from April 10, 2017, to Jan. 1, 2018.1 As of June 21, 2018, The U.S. Fifth Circuit Court of Appeals officially vacated the rule, effectively killing it

Must not “burden” TPTB.

The Fifth Circuit Court of Appeals, based in New Orleans, vacated the fiduciary rule in a 2-to-1 decision, saying it constituted “unreasonableness,” and that the DOL’s implementation of the rule constitutes "an arbitrary and capricious exercise of administrative power."17 The case had been brought by the U.S. Chamber of Commerce, the Financial Services Institute, and other parties. Its next stop could be the Supreme Court.

Has anyone heard anything further on this issue, since 2018?

2 Likes

BREAKING NEWS**

The current administration is trying, again, to hold investment advisors to a fiduciary rule. A Dept of Labor rule was proposed last fall. Of course, we are today, constantly hearing about the “need” to “kill the administrative state”, the narrative the NOLA court embraced in overturning the DOL rule in 2018: an arbitrary and capricious exercise of administrative power."

**On 31 October 2023, the Department of Labor (DOL) unveiled its proposed “Retirement Security Rule” (Proposed Rule)1 redefining who is an investment advice fiduciary under the Employee Retirement Income Security Act (ERISA). The determination of who is a fiduciary is of central importance because many of the protections, duties, and liabilities of ERISA hinge on fiduciary status. DOL also proposed amendments to several existing prohibited transaction exemptions (PTEs) that currently provide prohibited transaction relief to investment advice fiduciaries, including PTE 2020-02, which is the exemption financial institutions commonly rely upon in connection with rollovers.

The Proposed Rule is DOL’s fourth try since 2010 to expand investment advice fiduciary status. The first attempt was abandoned due to industry pressure. The second attempt produced a final rule in 2016, but was vacated by the Fifth Circuit in 2018. The third attempt, a more expansive interpretation of the existing rule released in connection with an exemption for investment advice, PTE 2020-02, was partly overturned by a Florida district court decision.3 We expect the Proposed Rule will also face challenges from the industry and in the courts.

2 Likes

There is some of that. At the same time there is the legal aspect. To quote from the WSJ article (and emphasizing the other – and larger – part):
“JPMorgan Asset Management, BlackRock and State Street Global Advisors on Thursday retreated from the Climate Action 100+ investor compact because they don’t want the political and legal liability.”

DB2

1 Like

They took the ESG label off it. Legally the idiots can not fight what they are not seeing or hearing.

The policies unwritten are fully in place.

Just because the ignorant unwashed are easily BS’ed that ESG is bad does not mean the intelligent ultra-wealthy will change their tune. Instead, they moved the music box.

If you live in NYC you drink the same water, you breathe the same air often from across the country’s smokestacks. These guys are dealing in trillions of dollars and sheer power. Someone who is entirely ignorant is not going to do a damned thing about what these guys want to do.

Right now the managers are looking down their noses at the stupidity and dumping the ignorant along the road.

1 Like

ESG Investing is like wanting a juicy T-bone steak without harming cattle.

The Captain

1 Like

Bond manager PIMCO withdraws from Climate Action 100+ investor coalition
https://www.reuters.com/markets/us/bond-manager-pimco-withdraws-climate-action-100-investor-coalition-2024-02-16/

DB2

1 Like

Investment managers are not cattle. They are THE STEAK. (Fire up the BBQ !!)

1 Like

Oh well then they should be funding prostitution, cocaine, and loan sharking. Anything else would bring a lower rate of return, and is therefore a breach of those duties.

7 Likes

They are limited to legal financial instruments (fiduciary requirements, ya know). If somebody can get SEC approval for bundled prostitution businesses then they could look into it.

If they had been limited, for example, to investing in renewables and not fossil fuel companies over the last three years they would have done a financial disservice to their clients.

              3-yr
            price chg
XOM (oil)    +105%
LNG (lng)    +137%
BTU (coal)   +478%
TAN (solar)  - 61% 
FAN (wind)   - 38%

DB2

1 Like

Bob,

You are kidding yourself that the ultra-wealthy gave you any say at all.

There is not a courtroom that will touch them now. Not one jot of their intentions has changed.