Republican states take drastic measure in latest salvo against ESG movement

FIRST ON FOX: A coalition of 13 Republican attorneys general filed a rare motion Monday, asking a top federal energy regulator to prevent a financial institution from purchasing shares of publicly listed utility companies.

The state officials, led by Utah Attorney General Sean Reyes, asked the Federal Energy Regulatory Commission (FERC), to hold a hearing examining whether Vanguard Group should be given blanket authorization to purchase large quantities of public utility stocks due to its support for environmental, social and governance (ESG) investing. ESG standards broadly promote investments in green energy over fossil fuels. 

As it and other major financial institutions do every three years, in February, Vanguard asked FERC for the green light to own more than $10 million worth of public utility shares. Under the Federal Power Act, FERC is required to periodically review and approve or deny such applications.

"The Commission granted the 2019 Authorization based on assurances from Vanguard that it would refrain from investing ‘for the purpose of managing’ utility companies," the state officials wrote in the filing Monday. "Vanguard 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.’"

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"Now, Vanguard’s own public commitments and other statements have at the very least created the appearance that Vanguard has breached its promises to the Commission by engaging in environmental activism and using its financial influence to manipulate the activities of the utility companies in its portfolio," the filing continued. 

The filing stated that the FERC should at least hold the requested hearing to examine the previous authorization it granted Vanguard in 2019.

"A hearing in this matter is warranted to determine the extent to which Vanguard has violated the 2019 Authorization and whether granting Vanguard a blanket authorization is contrary to the public interest," the attorneys general added.

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In addition to Utah, Kentucky, Indiana, Alabama, Arkansas, Louisiana, Mississippi, Montana, Nebraska, Ohio, South Carolina, South Dakota and Texas also joined the motion. The filing noted that there are investor-owned utilities in each of the states represented and argued that if those companies were weakened, their residents would be harmed. 

For example, PacifiCorp, a public utility company that serves Utah, is owned by Berkshire Hathaway Energy, a company Vanguard has pushed to disclose certain climate information. The filing said if Vanguard's ESG measures were to force PacifiCorp to prematurely retire its coal or natural gas generation facilities, consumers would be harmed by less reliable energy and higher prices.

"In 2021, Vanguard joined the Net Zero Asset Managers Alliance — a group of nearly three hundred asset managers who work together to ‘accelerate the transition towards global net-zero emissions,’" the filing continued. "By making net-zero commitments, Vanguard necessarily abandoned its status as a passive investor in public utilities and adopted a motive consistent with managing the utility."

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The filing also highlighted that Vanguard has worked on ESG with other major asset managers such as BlackRock and State Street, further calling into question its willingness to remain a passive investor in public utility companies.

Also on Monday, the consumer group Consumer's Research filed a motion similar to the motion the attorneys general filed with FERC. The group stated that it was concerned Vanguard's preferred policy agenda would "actively harm U.S. consumers by driving up energy prices."

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"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, but 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," said Will Hild, the executive director of Consumer's Research. 

"Affordable, reliable energy production is the foundation of America's economy and the quality of life we enjoy," he continued. "FERC's job is to defend utilities from exactly this type of reckless interference. They should act to protect these utilities and American consumers from fat cat Wall Street wreckers who blithely endanger our electricity supply."

FERC and Vanguard didn't immediately respond to requests for comment.