Vanguard and BlackRock are now facing more scrutiny over ESG investing, as both asset managers have reportedly cancelled public engagement meetings with companies, as they review the consequences of new Securities and Exchange Commission guidance. The new SEC reporting guidance, released earlier this month, redefines how investor activism is regulated.
The SEC has placed more restrictive regulations on asset managers that may attempt to influence the conduct of companies in which they invest by requiring extended disclosures from shareholders with a large equity stake in a company who engage with management on ESG topics. The SEC recommends that an asset manager undertakes “specific actions on a social, environmental, or political policy.”
Under SEC’s Schedules 13G and 13D, which govern disclosure of beneficial ownership of a company, a group of shareholders who own more than 5% of a company must report their ownership.
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The new guidance states that a shareholder that discusses its views on ESG issues, or why they’re voting or not voting a certain way, will trigger the more strenuous requirements.
Earlier this year, BlackRock, the world’s largest asset manager with more than $10 trillion in assets under management, dropped out of the Net Zero Asset Managers initiative, a United Nations-backed climate change coalition of top corporations who pledge to reach zero-carbon emissions by 2050 – a significant blow to the corporate push to embrace progressive policies on energy conservation. Days later, Net Zero suspended operations.
Related: Democratic officials urge SEC, DOL to protect ESG investing, post American Airlines 401(k) lawsuit
Before BlackRock dropped out of Net Zero, Morgan Stanley, Citigroup, Bank of America, Wells Fargo and Goldman Sachs and JP Morgan Chase had all withdrawn from the climate coalition.
Last December, BlackRock, Vanguard and State Street and were also sued by a group of 11 Republican states, led by Texas, for allegedly breaking antitrust laws by reducing coal production and boosting electricity prices through their investments, in the highest profile lawsuit yet against the beleaguered environmental, social and governance goals industry, seeking billions in damages.
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Lynn Cavanaugh
Lynn Varacalli Cavanaugh is Senior Editor, Retirement at BenefitsPRO. Prior, she was editor-in-chief of the What's New in Benefits & Compensation newsletter. She has worked for major firms in the employee benefits space, Vanguard and Willis Towers Watson, as well as top media companies, including Condé Nast and American Media.
