Vanguard and BlackRock Open up Their Ballots
Both Vanguard and BlackRock came out this week announcing plans to launch a trial that will allow individual investors to vote their shares directly. BlackRock and Vanguard funds combined find themselves owning double digit stakes in most public US Companies. As they have grown, the influence (most notably in proxy battles) has also grown.
BlackRock and Vanguard don’t ‘own’ the shares they vote – the shareholders should have been able to vote their shares this entire time. Further, the fact that Vanguard and BlackRock have been treating investors differently on this matter is counter to the core of their corporate mission. While retail investors aren’t likely to show up in droves – they do own 30% of publicly traded companies and should be able to influence corporate behavior. This underscores the continued theme of investor demand for access.
Chicago Teachers Go Sustainable with their Pension – Flipping the Script on Fiduciary Responsibility
The Chicago Teacher’s Pension Fund announced last week that it was divesting $350,000,000 (a.k.a. all of) of its fossil fuel holdings. They did leave room for a plan B – invest enough in clean energy to fully offset its stakes in oil, gas and coal. However, the messaging from Carlton Lenoir (executive director) was very clear – “[CTPF] has long understood that responsible and sustainable investments must form the core of our investment strategy.”
Finite’s Take:
State Pensions are increasingly taking sides, which – if you’ve been a subscriber for more than a week – you know from our previous letters. It’s worth repeating, teachers’ retirements should not be ‘politicized.’. While Chicago references ESG, it appears this is more about sustainable investing than anything else. Once again, ‘fiduciary’ takes center stage with Chicago countering states like Florida and Texas by claiming “As fiduciaries, our trustees must invest consistent with our mission to protect and enhance the present and future economic well-being of members, pensioners and beneficiaries.” If you’re interested in keeping up with where states stand on the issue, Ropes and Gray is keeping a tracker here.
NextEra Commits $1,500,000,000 To Convert Trash to Energy
NextEra Energy Resources announced that it is acquiring a portfolio of landfill gas-to-electric from Energy Power Partners for $1.1bn. The purchase also carries a commitment from NextEra to spend an additional $400m to convert the projects to renewable natural gas. The deal is expected to close in early 2023 and generate $220m of adjusted EBITDA by the end of 2025.
Finite’s Take:
While a relatively small acquisition for NextEra, $220m represents an 8.5% adjusted earnings improvement to NER, which is responsible for almost half of NEP’s overall earnings. At a 2025 multiple of ~19x, this seems to be accretive to their overall portfolio – assuming they can nail the execution. Notably, this transaction brings private assets with unknown emissions into the public markets which is counter to other energy transaction trends in the last few years.
