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April 17 (Reuters) - In prior newsletters I have reported on the ongoing review by U.S. energy regulators of top asset managers' big utility holdings.
Officials have taken up lingering questions about the reach of giant fund firms like BlackRock and Vanguard. Participants have put forward concepts like Vanguard's suggestion to limit fund firms' stewardship powers, or the notion of doing away with passive funds' proxy votes altogether offered by ratepayer advocates. This week's newsletter looks at filings from a group of Republican U.S. state officials who want more oversight of fund industry climate organizations, in line with other political pressure on investor coalitions.
You can read about their ideas below. You will also see an update on Morningstar's treatment by Florida investment leaders and a story about the impact of Facebook's approach to news in Canada.
A reminder that you can connect with me on LinkedIn. If you have a news tip, potential content, or general thoughts you can also email me at ross.kerber@thomsonreuters.com This week's most-read
Europe stands firm against US-driven ESG backlash
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Republican AGs look to limit climate groups A group of Republican state attorneys general asked U.S. energy regulators to put new limits on industry climate efforts, extending criticism that has already blunted investor campaigns to slow industrial emissions.
Their ideas are spelled out in a March 27 filing to the U.S. Federal Energy Regulatory Commission (FERC), which is reviewing utility ownership by major fund firms like BlackRock and Vanguard.
The two companies are known for their low-fee passive funds and together manage more than $19 trillion. Their scale has prompted concerns about their potential market impact, although studies on the issue have come to mixed conclusions.
In a comment letter, the Republican attorneys general, led by Utah's Sean Reyes and Indiana's Todd Rokita, cite groups like the Net Zero Asset Managers initiative and the Climate Action 100+ that aim to cut emissions. Regulators should regard such organizations as "holding companies" since they seek to influence utility operations, the officials say.
Treatment as holding companies would subject the entities to more oversight by FERC, such as inspection of their books and records, and could limit managers' ability to participate.
Currently, "the existing statutory scheme and FERC requirements designed to promote competition and protect utility consumers are not being applied" to the climate campaigns, the filing states. Kirsten Spalding, vice-president at sustainability nonprofit Ceres, the North American partner of the Net Zero Asset Managers initiative and of the group known as the CA100+, said their investor signatories do not make agreements to buy, sell or hold shares.
Instead they aim to share information about company performance to address climate risk in their portfolios. "They're not doing anything that qualifies as concerted actions," Spalding said.
"We're not a holding company by any stretch of the imagination," she said. The federal energy commission is set to include three Democrats and two Republicans. None are likely to apply "holding company" theory as the attorneys general suggest, said Alison Silverstein, an independent consultant and former FERC adviser, since there are not common financial ownership relationships among signatories to the Net Zero Asset Managers initiative or the CA100+.
"A company or NGO can walk away from an advocacy organization or trade association any time for any reason; but a corporate affiliate can’t walk away from its holding company," she said, via email.
Vanguard never joined the CA100+ and in late 2022 left the Net Zero Asset Managers initiative, citing a need to show its independence. BlackRock remains a member of the Net Zero Asset Managers initiative, according to its website, but in February transferred its participation in the CA100+ to its international arm.
BlackRock in a March 26 comment letter to FERC said it does not exercise control over utilities or coordinate voting with rivals or external groups.
"Our participation in industry initiatives is secondary to our fiduciary duties to our clients, and we have made it clear to those initiatives that our participation was contingent on us acting independently and in our clients’ best interests," BlackRock executives wrote.
Company News Facebook's decision to block news content in Canada, in response to media payment requirements, has boosted engagement with opinion and nonverified content like memes and could undermine online discourse, new research shows.
Tesla is laying off more than 10% of its global workforce, including staff in the U.S. and China, as it grapples with falling sales and an intensifying price war for electric vehicles.
A possible bid for corporate icon BP by the United Arab Emirates' state-owned oil group has thrown a spotlight on the vulnerability of Britain's largest companies to takeover and the threat to London as a global capital markets hub.
On my radar
Proxy voting guidelines for 2024 from New York State Comptroller Thomas DiNapoli, who oversees public retirement assets, include criteria to judge directors' climate performance such as when a company "fails to adopt robust climate targets." The California Public Employees' Retirement System said Chief Operating Investment Officer Michael Cohen has been appointed chair of the steering committee of the Climate Action 100+, the organization mentioned above.
Florida pension fund leaders took Morningstar off their list of companies scrutinized for "boycotting" Israel on April 9, citing changes made by the company's Sustainalytics unit to its ratings process. (Reporting by Ross Kerber in Boston Editing by Matthew Lewis)
