It may be too early to call out a hero, but we will mention a noteworthy heroic act of some importance. The person behind the “Heroic Act of the Week” is Tim Buckley, CEO of Vanguard, the second largest global money manager. Buckley’s first heroic act was to withdraw Vanguard from the Net Zero Banking Alliance at the UN last December. His second remarkable act in February was to point out that ESG investing as currently promoted is not sensible. The Wall Street Journal described this as follows:
“‘Our research indicates that ESG investing does not have any advantage over broad-based investing,’ Mr. Buckley said in a recent interview with the Financial Times. Matching word to deed, his comments came after he had withdrawn his firm from the $59 trillion Net Zero Asset Managers initiative, an organization that is part of the $150 trillion United Nations-affiliated Glasgow Financial Alliance for Net Zero. Both alliances are committed to restricting their investments over time to companies that are compliant with the Paris Agreement’s objective of net-zero greenhouse gas emissions by 2050. Mr. Buckley claims the financial world, swept up in climate-change fervor, can’t make such commitments without reneging on its fiduciary duties.”
Asset managers should encourage and seek excellence in governance and management and leave the detailed execution necessary to optimize the needs of wide and complex economic enterprises to the people responsible for managing them. As one great asset manager we know once said, excellent management means “leading to appropriate decision making.” Mr. Buckley clearly understands this. He also understands the legitimate concern of the growing number of State Treasurers who are pulling pension assets from managers who do not.
Mr. Buckley hangs his hat on the importance of transparency in the broad markets. We agree regarding the power of transparency. However, broad market transparency has been turned off, and we have entered broad market darkness. It started with the federal government’s refusal to obey financial management and disclosure laws in the mid-1990s while undocumentable transactions ballooned in the trillions. It culminated in waivers from SEC regulations for corporations for national security purposes, followed by the promulgation of FASAB-56 in 2018. All of this is described in our review “Caveat Emptor: Why Investors Need to Do Due Diligence on U.S. Treasury and Related Securities” as well as in our Legal Series on U.S. federal finance laws, including FASAB-56.
The absence of transparency regarding U.S. government finances and related corporate revenues and profits is one of the reasons that the Federal Reserve and U.S. Treasury have been able to institute a series of monetary and fiscal policies that are systematically liquidating significant parts of the private economy that supports federal credit and tax collections. Debt is growing at rates well beyond the GDP as productivity falls. These trends traditionally lead to war, tyranny, and death.
The day when Mr. Buckley points out that the U.S. government should obey financial disclosure laws and turn the lights back on, he will qualify for Solari Hero of the Year. Until then, we commend him for leaving the Net Zero Alliance and for his criticism of ESG.
We are not a fan of large financial institutions at this time, but we cheer them when they move in a sensible direction. Mr. Buckley gets a tip of the hat for his leadership on these issues. Bravo.
Related Reading:
Wall Street Journal opinion piece: “Vanguard’s CEO Bucks the ESG Orthodoxy”
Financial Times article: “Vanguard chief defends decision to pull asset manager out of climate alliance”
Caveat Emptor: Why Investors Need to Do Due Diligence on U.S. Treasury and Related Securities (2018 Annual Wrap Up)
Legal Series – US Monetary and Fiscal Operations (The Missing Money)
Environmental, Social, and Corporate Governance (ESG) on Wikipedia
The Vanguard Group on Wikipedia
Related Video:
For those who have not explored the corruption of the Net Zero Alliance, we recommend this recent excerpt from Louisiana Senator John Kennedy:
Kennedy questions Litterman, Holtz-Eakin on climate in Budget
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