Attorney General Cameron Launches Investigation into ESG-Related Investment Practices of Vanguard, State Street Bank

FRANKFORT, Ky. (November 14, 2022) – Attorney General Cameron today launched an investigation into alleged violations of Kentucky’s consumer protection laws related to ESG (environmental, social, governance) investment practices of The Vanguard Group, Inc. (Vanguard) and State Street Bank (State Street).

“Kentucky’s Consumer Protection laws prohibit companies from placing a climate agenda ahead of the financial profitability of their client’s investments,” said Attorney General Cameron. “We launched this investigation to protect Kentucky consumers, and we look forward to hearing from Vanguard and State Street on these matters.”

To open the investigation Attorney General Cameron sent Vanguard and State Street civil investigative demands seeking a wide range of relevant information. These demands request documents and information regarding ESG investment practices and the fiduciary responsibilities these companies have agreed to as members of the Glasgow Financial Alliance for Net Zero, Climate 100 +, and as a signatory of Net Zero Asset Managers (NZAM).

State Street has publicly stated that it joined NZAM “to ensure our portfolios reach net-zero greenhouse gas emissions by 2050 or sooner and set interim targets for 2030.” The company further explains that its net-zero strategy is “tailored to the key levers we have to further the transition to a low-carbon economy,” that its “primary lever is engagement with investee companies, clients, and market participants,” and that it uses its engagement to “encourage investee companies to adopt de-carbonization goals and/or energy transition plans, advocate policy-makers to promote climate-related disclosures, and work with index vendors to offer net- zero-aligned indices.”

Similarly, Vanguard has publicly stated that, in 2021, it engaged with 1,074 companies representing $3.5 trillion of Vanguard fund equity investments. Vanguard also publicly stated that, in 2019, it engaged with 250 companies in “carbon-intensive industries” regarding “climate-related matters.” Vanguard has identified “climate-related risk” as relevant to its second principle, “oversight of strategy and risk.” Vanguard has stated that “[t]he oversight of strategy and risk is not an area that frequently manifests itself directly in voting; therefore, we expect companies and their boards to be prepared to engage on this topic.”

The civil investigative demands sent to Vanguard and State Street include requests for:

  • Information related to involvement with Principles for Responsible Investment (PRI)
  • Documents and communications related to ESG Integration Practices and/or ESG Factors
  • Documents related to internal ESG analysis criteria and all ESG analyses, whether complete or incomplete.
  • Documents, communications, and research related to the effects of reduced investment in oil, gas, fossil fuel, or other energy sources, including, without limitation, effects on supply, production, energy prices, profits, and investment returns.
  • Information related to involvement with Net Zero Asset Managers.

To view a copy of the civil investigative demand for Vanguard, click here and for State Street, click here.