Global warming, climate change, all these things are just a dream come true for politicians. I deal with evidence and not with frightening computer models because the seeker after truth does not put his faith in any consensus. The road to the truth is long and hard, but this is the road we must follow. People who describe the unprecedented comfort and ease of modern life as a climate disaster, in my opinion have no idea what a real problem is.
Under the deal, Vanguard commits to pursue engagement and proxy voting solely to further investors’ long-term returns. It also agrees that it will not attempt to direct portfolio companies’ strategies or advocate for steps to reduce carbon emissions, nominate directors, submit shareholder proposals, solicit proxies, or threaten to sell holdings as leverage to induce corporate action.
Under the deal, Vanguard commits to pursue engagement and proxy voting solely to further investors’ long-term returns. It also agrees that it will not attempt to direct portfolio companies’ strategies or advocate for steps to reduce carbon emissions, nominate directors, submit shareholder proposals, solicit proxies, or threaten to sell holdings as leverage to induce corporate action.
The settlement requires Vanguard, by the end of June 2027, to offer proxy voting to investors in funds that hold at least 50% of their assets in U.S. equities. Vanguard must continue to offer expanded choices through at least June 2032 and include an option to vote in line with management recommendations.
Finally, Vanguard must publicly disclose proxy voting records at least four times a year, withdraw from the Principles for Responsible Investment initiative, and avoid joining organizations that require climate-focused commitments or advocate specific emissions/output targets. The agreement explicitly names the groups Net Zero Asset Managers, Ceres, and Climate Action 100+.
In short, the settlement draws a bright red line between passive investing and activist corporate governance, effectively removing proxy power from a small group of asset manager stewardship offices and returning it to actual investors.
Climate watchers have watched environmental, social, and governance frameworks expand from emissions accounting to extensive scorecards intended to exert political pressure on companies. Major ESG ratings methodologies treat “packaging material and waste” as a key environmental issue, with a hyperfocus on plastic packaging use and waste intensity.
When index fund managers of the size of Vanguard focus on redesigning markets and use proxy votes and behind-the-scenes engagement to push “best practices” based on ESG scoring, they can shape real-world decisions such as capital allocation, production planning, energy policy posture, and corporate behavior on issues such as plastics. These activities are way out of their lane.
The appeal of index funds is the low-cost exposure to the market and the promise to everyday investors of tracking an index, keeping costs down, and not playing politics with investors’ nest eggs.
ESG stewardship blurred that promise.
Asset managers that hold meaningful stakes across large swaths of the market and coordinate efforts via shared alliances, targets, and engagement playbooks can exert centralized pressure. That was the issue at the heart of the Texas-led lawsuit. State attorneys general have alleged that coordinated climate-focused investing and stewardship harmed energy markets. The firms dispute the claims.
The Vanguard-Texas settlement signals a broader rethink inside the finance space. Just a day before the news of it broke, Net Zero Asset Managers relaunched with looser rules and fewer U.S. participants after a long suspension because of legal and political pressure.
Vanguard exited the Net Zero Asset Managers initiative in December 2022, citing concerns that collective climate pledges can blur individual firms’ positions. The settlement goes further, locking in constraints on Vanguard’s participation in climate pledge organizations and its stewardship posture going forward.
This settlement doesn’t end the ESG debate. It doesn’t decide the case against the remaining defendants. Still, make no mistake: When one of the largest asset managers in the world agrees to step back from the ESG stewardship model that has blurred passive investing with activist corporate management, it’s a big deal.
This is a win for fiduciary clarity, investor sovereignty, and anyone who believes private alliances and ideological scorecards shouldn’t dictate America’s energy future. It doesn’t matter whether the issue is energy or plastics. Whatever the next “environmental priority” ESG managers decide to impose, the principle will be the same: Markets work best when they are driven by consumers and shareholders, not coordinated political campaigns disguised as investment stewardship.
She comes to CFACT (Committee For A Constructive Tomorrow) with a background in environmental/energy policy work, especially in combatting the offshore wind turbine groups and green organizations in their plans for northeast construction of wind farms up and down the Atlantic coast.
As a policy analyst for CFACT and host of the podcast How Money Works with Melanie Collette, she’s made it her mission to speak out against harmful or inadequate social and public policy issues, simplify economics and energy issues, and empower others with practical financial wisdom.
Before stepping into the national spotlight, Melanie spent over 24 years in education, with 12 of those years dedicated to teaching business and technology.
Her background as a former educator and current Cape May County Commissioner in New Jersey speaks to her deep commitment to serving her community.
Beyond her local leadership roles, she’s also a former Vice Chair of the New Jersey Federation of Republican Women and now serves as Vice Chair of the Cape May County GOP.
When she’s not analyzing policy or sharing money tips, Melanie is a regular face on television, known for her sharp, thought-provoking commentary on today’s hottest issues.
With more than 400 on-screen appearances—and adding 3 to 5 new segments weekly—her voice has become a trusted resource on the intersections of media, education, and policy.
Melanie’s public policy work and her passion for financial literacy has made her a sought-after speaker nationwide.
Whether delivering keynote addresses or joining panel discussions, she inspires audiences with her unique blend of experience, insight, and unwavering dedication to empowering others.
Writing shortly before President Trump’s return to the White House, Peter Thiel hailed the election as an apokálypsis, an unveiling, of the ancien régime’s secrets. “The new administration’s revelations need not justify vengefulness,” Thiel wrote. “But for reconciliation, there must first be truth.” The early weeks of Trump’s second term have been apocalyptic for some of progressives’ favorite acronyms such as DEI and USAID. So far, arguably the most damaging, ESG — an approach to finance derived from the UN’s Principles for Responsible Investment — and its spawn, stakeholder capitalism — which demotes shareholders to one of many groups (employees, customers, suppliers, and the environment) that companies should prioritize — have evaded their rendezvous with truth.
Writing shortly before President Trump’s return to the White House, Peter Thiel hailed the election as an apokálypsis, an unveiling, of the ancien régime’s secrets. “The new administration’s revelations need not justify vengefulness,” Thiel wrote. “But for reconciliation, there must first be truth.” The early weeks of Trump’s second term have been apocalyptic for some of progressives’ favorite acronyms such as DEI and USAID. So far, arguably the most damaging, ESG — an approach to finance derived from the UN’s Principles for Responsible Investment — and its spawn, stakeholder capitalism — which demotes shareholders to one of many groups (employees, customers, suppliers, and the environment) that companies should prioritize — have evaded their rendezvous with truth. That needs to change, because the last four years saw an unprecedented and sustained attack on America’s system of shareholder capitalism.
A year ago, the Delaware Court of Chancery struck down the ten-year performance-driven compensation package the Tesla board had awarded Elon Musk, a ruling reaffirmed in December despite the package having gained overwhelming shareholder approval a second time. Three years earlier, in May 2021, shareholders in ExxonMobil voted to put three directors on the board from a minuscule activist investor, Engine No.1, with a mandate to drive America’s largest oil company out of the oil and gas business and thereby destroy shareholder value.
The apparent paradox — no, let’s put that more strongly: The perversity of shareholders voting against their own apparent interests, which is what happened at ExxonMobil, has its own well-deserved apokálypsis in Andy Puzder’s new book, A Tyranny for the Good of Its Victims: The Ugly Truth about Stakeholder Capitalism (Encounter Books, January 2025). Central to Puzder’s account of the attempt to destroy shareholder capitalism is the role of the Big Three asset managers — BlackRock, Vanguard, and State Street Global Advisors (SSGA), whose enormous size derives from the popularity of index funds among institutional investors and private investors alike.
Fundamental to the success of shareholder capitalism is the alignment of investors’ financial interests with the success of the businesses they’re shareholders in, which in turn drives economic growth and rising living standards. As Robert Rubin, President Clinton’s Treasury secretary for most of his second term, recently wrote in the Wall Street Journal, “While every company functions differently, businesses share the overarching goal of strong profitability over time. That focus is fundamental to our market economy.”
That link between the interest of the investor and the company is broken with index investing. “Don’t look for the needle in the haystack. Just buy the haystack!” John Bogle, the pioneer of index investing and founder of Vanguard, advised. The success of index funds gives rise to the anomalous situation where the Big Three have the most votes in a huge number of American companies but where their financial interest in the individual success of those businesses is so attenuated as to be virtually non-existent.
Puzder accuses the Big Three of corrupting capitalism. The corruption is not about anything as vulgar as money, it’s about power — in Puzder’s words, the Big Three’s use of their “unaccountable power to accomplish their ends.” Puzder exposes the speciousness of ESG as an investment methodology and how the Big Three’s inflicting ESG on businesses has real-world harms. An example is the collapse of Silicon Valley Bank (SVB) in March 2023. Each of the Big Three had voted in favor of all SVB board candidates at SVB’s annual shareholder meeting in April 2022, even though BlackRock’s consulting arm had given SVB “a gentleman’s C” for its risk controls and found SVB lagging behind similar banks in eleven out of eleven factors in January 2022. SVB did not have a chief risk officer for nine critical months, and its sole board director with the necessary banking expertise, Thomas King, a former Barclays Investment Banking CEO, was excluded from SVB’s risk management committee.
Despite these warning signs, SVB was still included in BlackRock’s ESG-based fund products. As Puzder observes, “BlackRock’s major concern was not primarily corporate governance — it was diversity, and SVB gave BlackRock what it wanted.” (Puzder on DEI is priceless: “Three lies in one acronym.”) There’s no real reason to think that SSGA or (at least for a while) Vanguard saw things any differently. As Steve Soukup writes in his review, the “G” is often mistakenly viewed as the acceptable letter in ESG and goes on to quote Puzder that the “G” should be a “D” “because it stands for selecting corporate board members based on ‘diversity’ rather than merit or value to the company.”
But wasn’t ESG meant to identify risks that traditional financial analysis allegedly ignores? Not according to MSCI ESG Research, which had given SVB’s parent an above-average “A” rating. One of its vice presidents explained, “E, S, G does not cover core financial risks. We’re looking to assess financially-relevant environmental, social and governance factors, not financially-relevant financial factors.” Got that? Yup. It’s total hogwash.
Puzder puts this in the context of the Big Three’s willingness to use its voting power to bully boards into compliance with their dictates. In BlackRock CEO Larry Fink’s 2020 letter to CEOs — Puzder’s textural analysis of Fink’s annual epistolary emissions is outstanding — he warned boards, “When a company is not effectively addressing a material issue, its directors should be held accountable.” And that’s what BlackRock did. In 2021, BlackRock voted against the reelection of 1,862 directors at 975 companies based on a lack of board diversity.
In his 2019 letter, “Purpose and Profit” — earning Puzder’s rejoinder, “Profit is the purpose for which businesses exist” — Fink asserted that “society,” meaning himself, was “looking to companies to address pressing social and economic problems.” Later that year, the Business Roundtable (BRT) produced its now notorious “Statement on the Purpose of a Corporation,” about which Alex Gorsky, its chair of corporate governance and Johnson & Johnson CEO, confessed, “There were times when I felt like Thomas Jefferson.”
The document produced by the BRT’s Thomas Jefferson reversed the long-standing view of corporate purpose famously set out by Milton Friedman in a 1970 New York Timesarticle. Puzder — his book is dedicated to Friedman’s memory — points out that the Big Three are the largest shareholders in virtually every company that signed the BRT statement, and in the case of Gorsky’s Johnson & Johnson, control a combined 23% of the stock. “It may have been a coincidence that the BRT issues its shareholder-capitalism concession in a year when BlackRock alone ‘voted against or withheld votes from 4,800 directors at 2,700 different companies’ — but I seriously doubt it,” Puzder writes.
Fink’s next two letters were even more extreme. “Every government, company and shareholder must confront climate change,” Fink wrote in bold type in his 2020 letter to CEOs, warning that climate change was causing “a fundamental reshaping of finance.” He went further in his 2021 letter, saying, “It’s important to recognize that net zero demands a transformation of the entire economy.” Who was demanding net zero? It wasn’t Congress. Congress has never passed a climate law with decarbonization targets, let alone a net-zero law. It was Fink who demanded — “we are asking” — that companies prepare net-zero plans and incorporate them into their long-term strategy.
There was real menace behind those words. In his 2020 letter, Fink had written, again in bold type, that BlackRock would be “increasingly disposed to vote against management and board directors when companies are not making sufficient progress on sustainability-related disclosures and the business practices and plans underlying them.” Fink went on to note that BlackRock had voted against or withheld votes from 4,800 directors at 2,700 different companies. That year, BlackRock’s stewardship team disclosed it had identified 244 companies making insufficient progress integrating climate risk into their business models or disclosures and had taken “voting action” against 53 of them. “This was an exercise of raw and absolute financial power,” Puzder writes. “If you were the CEO of one of the thousands of companies in which BlackRock invested the message was clear — Resistance is futile.”
One of those companies is, of course, ExxonMobil. Justifying its value-destroying, anti-fossil-fuel vote for the three Engine No.1 directors, BlackRock said it had a long history of multi-year engagement with the company on a range of issues including “oversight of climate risk” and had engaged with Exxon no fewer than twelve times over the previous year. “That is a lot of ‘stewardship,’” Puzder writes. “As it turns out, for U.S. and global consumers, international security, and Exxon’s shareholders, forcing Exxon to reduce oil production and advance net-zero policies was unequivocally the wrong plan.”
The Big Three are unlike other investors who make a bad call and suffer the consequences in their investment performance or who vote their values and accept the hit to their returns. For index fund providers, owning individual stocks and the proxies vested in them is an unavoidable by-product of Bogle’s buying the haystack. The Big Three’s vast accumulation of proxies creates the temptation for index managers to exercise power without responsibility and pursue ESG as politics by other means. The traditional assumption that shareholders were solely or primarily interested in financial return was not one that could be safely made in their case. That might have been true of their clients, whose money they were managing — the “real” (underlying) shareholders — but their investment managers had bigger fish to fry such as saving the planet.
Of them, despite some verbal backtracking by Fink, only Vanguard has shown the necessary awareness of the dangers this creates. “We don’t believe that we should dictate company strategy,” Vanguard’s then CEO, Tim Buckley, told the Financial Times in February 2023. “It would be hubris to presume that we know the right strategy for the thousands of companies that Vanguard invests with. We just want to make sure that risks are being appropriately disclosed and that every company is playing by the rules.”
Puzder has been a leading light in the resistance against ESG, which, especially at state level, was already proving far from futile even prior to Trump’s return to the White House. It’s a mark of progress that, as early as June 2023, Fink had dropped the term ESG, but remains committed to discussing “decarbonization” with companies that it describes as “critical to the transition to a low-carbon economy,” including those with carbon-intensive business models. DEI lives on in BlackRock’s “engagement” with companies over their “human capital management” including efforts to foster a diverse and inclusive workforce culture. “If you believe the collectivists will discontinue their efforts to use their massive financial leverage in order to achieve their authoritarian vision of utopia, you are wrong,” Puzder warns.
A May 2024 Bloomberg editorial board opinion piece echoed Buckley’s view in arguing that the Big Three’s stewardship “should be restricted to ensuring effective corporate governance and rigorously documented and disclosed.” Bringing about such a restriction in a legal settlement should be a key aim of litigation against the Big Three brought by states such as Texas. “Stewardship is actually more effective and more insidious than proxy voting, as it occurs in C-suite conference rooms and on Zoom calls, beyond the purview of both investors and those who would protect their interests,” Puzder says. The only durable and effective remedy is to radically curtail the scope of issues on which index funds can cast their proxies so that they are cast in favor of board proposals except for those ensuring more effective corporate governance or where adoption of a proposal would result in a demonstrable increase in shareholder returns.
Puzder himself says of ESG’s opponents, “We are not going away.” On January 23, President Trump nominated him to be U.S. ambassador to the EU. If confirmed by the Senate, Puzder will confront another threat to American capitalism in the form of the EU Sustainable Finance Disclosure Regulation and the EU taxonomy on sustainable activities and the ESG requirements they impose on European investors in American companies. If Brussels wants to gain a preview of the nominee, they would do well to read Puzder’s book, as should anyone who cares about the future of shareholder capitalism in America.
RUPERT DARWALL is a senior fellow of the National Center for Energy Analytics and author of The Age of Error: Net Zero and the Destruction of the West (publication later this year by Encounter Books).
This article was originally published by RealClearEnergy and made available via RealClearWire.
Texas and 10 other US States have pressed the radioactive Antitrust legal button and filed against BlackRock, Vanguard and State Street. The states claim the money managers bought up large stakes in coal companies and then colluded to promote ESG and DEI (diversity, equity and inclusion) goals that reduced coal output. The decreased supply of coal, in turn increased the cost of electricity to consumers. It was fundamentally anti-competitive behaviour. These three companies together have $26 Trillion dollars of assets under management. That’s only one trillion smaller than the entire US GDP.
Texas and 10 other US States have pressed the radioactive Antitrust legal button and filed against BlackRock, Vanguard and State Street. The states claim the money managers bought up large stakes in coal companies and then colluded to promote ESG and DEI (diversity, equity and inclusion) goals that reduced coal output. The decreased supply of coal, in turn increased the cost of electricity to consumers. It was fundamentally anti-competitive behaviour. These three companies together have $26 Trillion dollars of assets under management. That’s only one trillion smaller than the entire US GDP.
In this case, some of the collusion hidden in clear view. The three money managers said they were trying to save the world and to protect the people, and they joined groups like the GFANZ and Net Zero alliances like Climate Action 100+. But in the end, these three financial giants had collectively acquired close to 30% of most US Coal companies, and even though they claimed to have good intentions, the 11 State Attorney Generals argue that any extraneous claims of social benefits are irrelevant. These three companies have profited immensely while customers have been denied access to a free and open market and have paid higher electricity bills.
In a democracy, the people are supposed to decide the policies, not the Oligarchs.
Look at the grip the three supermassive money managers had on the coal industry:
No wonder coal companies were so pathetic at standing up for themselves, and fighting back against the climate propaganda. They were captured by the Blob and held hostage to larger goals:
The defendants were accused of exploiting their market power and involvement in climate advocacy groups to pressure coal companies to slash output and reduce carbon emissions from coal by more than 50% by 2030, driving up consumers’ utility bills.
“Competitive markets — not the dictates of far-flung asset managers — should determine the price Americans pay for electricity,” the states said in the complaint.
Texas Attorney General Ken Paxton, whose office filed the lawsuit, in a statement accused the defendants of promoting an “illegal weaponization of the financial industry in service of a destructive, politicized ‘environmental’ agenda.” The lawsuit aims to stop these companies from voting on shareholder resolutions or acting in a way to undermine coal output and competition. The Attorney Generals also want money — calling for fines to be paid for the antitrust violation.
For the past four years, America’s coal producers have been responding not to the price signals of the free market, but to the commands of Larry Fink, BlackRock’s Chairman and CEO, and his fellow asset managers. As demand for the electricity Americans need to heat their homes and power their businesses have gone up, the supply of the coal used to generate that electricity has been artificially depressed—and the price has skyrocketed. Defendants have reaped the rewards of higher returns, higher fees, and higher profits, while American consumers have paid the price in higher utility bills and higher costs.
The three financial giants have violated the Clayton Act (Antitrust legislation)
Defendants are three of the largest institutional investors in the world. Each Defendant has individually acquired substantial stockholdings in every significant publicly held coal producer in the United States. Each has thereby acquired the power to influence the policies of these competing companies and bring about a substantial lessening of competition in the markets for coal. And each has used its power to affect a substantial reduction in competition in coal markets. Considered alone and in isolation, each Defendant’s acquisition and use of producers has violated Section 7 of the Clayton Act.
… Defendants have immense influence over these companies on their own, but collectively Defendants possess a power to coerce management that is all but irresistible.
They have made their goals public
But Defendants have not just acted alone and in isolation. In 2021, they went further. In that year, Defendants each publicly announced their commitment to use their shares to pressure the management of all the portfolio companies in which they held assets to align with netzero goals. Those goals included reducing carbon emissions from coal by over 50%. Rather than individually wield their shareholdings to reduce coal output, therefore, Defendants effectively formed a syndicate and agreed to use their collective holdings of publicly traded coal companies to induce industry-wide output reductions.
And even though they have pulled out of these Net zero alliances, (or Monster Banker Clubs), that doesn’t change the fact that they did engage in anticompetitive behaviour and still continue to threaten the free market.
Pretending to save the world while profiting from collusion is not OK
Defendants have publicly defended their anticompetitive scheme with appeals to environmental stewardship. But acquiring shares of common stock, “the effect of which ‘may be substantially to lessen competition’ is not saved because, on some ultimate reckoning of social or economic debits and credits, it may be deemed beneficial.” … The nation’s antitrust laws “reflect a legislative judgment that ultimately competition will produce not only lower prices, but also better goods and services.” … Defendants’ belief that concern for the climate confers a license to suppress competition is “mistaken.
The antitrust laws don’t permit [the enforcers of America’s antitrust laws] to turn a blind eye to an illegal deal just because the parties commit to some unrelated social benefit.”1 Under the antitrust laws, full and open competition must dictate domestic coal production.
In addition to joining with the other two major institutional asset managers to bring about a reduction in the output of coal, Defendant BlackRock went further—actively deceiving investors about the nature of its funds. Rather than inform investors that it would use their shareholdings to advance climate goals, BlackRock consistently and uniformly represented its non-ESG funds would be dedicated solely to enhancing shareholder value. But as detailed below, BlackRock routinely violated its pledge to investors, using all its holdings to advance its climate goals and—as most relevant here—promote the objectives of its output-reduction syndicate.
The States that may save us all are Texas, Alabama, Arkansas, Indiana, Iowa, Kansas, Missouri, Montana, Nebraska, West Virginia, and Wyoming.
Other countries should be following suit and looking hard at their own competition laws. We may not have antitrust laws, but most of the West have some kind of competition laws against cartels who misuse their market power.
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