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Dec 14 (Reuters) - Last May I wrote about efforts by Republican elected officials in proceedings before a U.S. utility regulator to question the role that big index funds had taken in their ownership of major utilities.
Now it looks like those efforts might have prompted some action, based on a Sunshine Notice posted about a meeting on Dec. 19 at the Federal Energy Regulatory Commission (FERC). It's interesting partly because a liberal advocacy group has raised similar concerns about the growing influence of the big funds, which could soon be aired out.
You can read more about the matter below. This week I've also highlighted a story by myself and colleagues showing how corporations worldwide are getting into DIY Carbon Pricing, absent much formal guidance from regulators. And don't miss a smart analysis by colleagues about how sustainable fund managers aren't so impressed by a COP28 emissions-reduction pledge by oil majors.
Please connect with me on LinkedIn where I welcome comments and feedback. If you have a news tip, potential content, or general thoughts feel free to email me at (And yes, this newsletter usually comes out on Wednesday, but this was a busy week.)
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FERC spotlight looms for BlackRock & Vanguard Pressure on BlackRock and Vanguard over the size of their utility holdings may produce some guidance from the top U.S. energy regulator on the lingering question of whether index funds have gotten too big.
FERC has listed as an agenda item "Federal Power Act Section 203 Blanket Authorizations for Investment Companies" for a Dec 19 meeting. Section 203 allows the commission to regulate changes in utility ownership.
FERC representatives did not give more detail, but the commission has been grappling with questions about big index funds raised by liberals and conservatives alike. Tyson Slocum, a director for the liberal advocacy group Public Citizen, said he expects FERC will begin some kind of review or public discussion about the broad authorizations the commission has granted BlackRock and Vanguard to own big utility stakes.
"I think they're going to propose some sort of standards to qualify for blanket authorizations, which may mean they're going to place some limits on it," Slocum said. Together running some $16 trillion, BlackRock and Vanguard face concerns about their impact on markets and corporate governance. Each has received authorizations from FERC to exceed ownership limits, like one to Vanguard allowing it to own up to 20% of utility voting securities, with no one fund owning more than 10%.
A group of Republican attorneys general had protested that waiver, saying Vanguard was no longer just a passive investor because of steps like supporting calls for corporate greenhouse gas disclosures. On May 10, a larger group of Republican AGs requested FERC review a 2022 authorization given to BlackRock, and they renewed their request on Dec. 6.
FERC's four current commissioners include two Democrats and two Republicans. When I asked about the attorney generals' concerns the only response I got came from a representative of Republican commissioner Mark Christie referring me to comments he made in 2022 when granting BlackRock's authorization. Praising the views of Public Citizen's Slocum, Christie wrote that "With regard to this Commission’s regulation of electric utilities, the important question is whether huge asset managers like BlackRock are able to exert undue pressure on regulated public utilities or their holding companies to engage in practices that may undermine their primary responsibilities of delivering reliable power to consumers at just and reasonable rates." Further scrutiny is warranted, he wrote.
Christi Tezak, managing director of researcher Clear View Energy Partners, said she expects FERC next week may seek comments on questions like how it should treat cumulative passive investments by related entities such as groups of funds managed by one company, and what if any changes the commission might make to its oversight. She cautioned that FERC does not regulate the overall size of asset managers, and that no final action is likely for months or longer. "Whatever comes out next won't be written overnight," she said.
Representatives for the AGs who led the Dec. 6 motion, Utah's Sean Reyes and Indiana's Todd Rokita, each declined to comment on the upcoming hearing.
BlackRock declined to comment. In a May 25 filing asking FERC to deny the AG's motion, BlackRock said it only "encourages sound corporate governance and business practices" at portfolio companies and does not co-ordinate proxy votes with others. Vanguard declined to comment. It had previously told FERC that its funds do not exert control over the decisions of the utilities.
Company News In a ruling that could upend the app store economy, Epic Games prevailed in its high-profile antitrust trial over Alphabet's Google. Epic had alleged the Play app operated as an illegal monopoly, and convinced a jury on all counts.
Miner Glencore said it will publish an updated climate transition plan in March, under pressure after big investors including BlackRock rejected the company's climate report last May.
Joining efforts to pressure automaker Tesla into accepting collective bargaining rights, Sweden's Transport Workers' Union said it would stop collecting waste at the company's workshops in the country.
On my radar There is a lot to track coming off the COP28 climate summit around how big an impact the global agreement to start reducing fossil fuel consumption actually makes, including how much help developed countries will offer the rest of the world and the role of technologies like carbon capture. We're not far off from the World Economic Forum's annual meeting in Davos, Switzerland set for Jan 15-19. This year's theme is "Rebuilding Trust" according to its website. (Reporting by Ross Kerber; Editing by David Gregorio)
