On February 25, 2026, The Vanguard Group settled its part of the closely watched antitrust action brought by 13 Republican state Attorneys General in the Eastern District of Texas, agreeing to pay $29.5 million and make certain commitments regarding its investment stewardship and proxy practices. The AGs have not been shy about claiming this as a victory in their attack on ESG investing practices. But a closer look at the settlement terms tells a different story: the commitments to which Vanguard agreed largely reflect current industry norms and standard stewardship practices that the asset management industry has long embraced as a matter of course.
In late 2024, 13 state AGs sued Vanguard and two other asset managers, alleging that the firms’ participation in climate-focused industry initiatives – coupled with their funds’ sizeable holdings in the shares of coal company stock – negatively affected energy prices and violated antitrust law. Last week, Vanguard settled individually while expressly denying any wrongdoing or liability.
Beyond the monetary payment, the settlement contains several categories of substantive commitments that may reflect areas of emphasis and focus for anti-ESG regulators going forward. Following are three notable topics addressed in the agreement.
Independent Stewardship of Externally Managed Funds. Vanguard agreed to keep its investment stewardship function “separate and independent” from the stewardship activities of unaffiliated subadvisers managing certain Vanguard funds, including by not coordinating on engagements or proxy votes for those funds’ U.S. equity investments. As a practical matter, even if regulators sought to have such “independence” requirements applied more broadly across the industry, we would not anticipate the need for meaningful changes to manager practices. In our experience, managers develop and deploy their engagement and proxy voting approaches in a rigorously independent manner as a matter of course, consistent with their fiduciary principles. They would not be expected to adjust those stewardship approaches when acting as a subadviser. Just as a primary adviser would typically not involve itself in the specifics of a subadviser’s research and security selection process, so, too, the subadviser’s stewardship practices are solidly within its delegated discretion.
Proxy Voting Choice. Vanguard committed to using “commercially reasonable efforts” to make proxy voting choice – a program generally designed to allow investors to select from a range of voting policy options – available to investors in funds accounting for at least 50% of assets invested in U.S. equities by June 2027, continuing through at least June 2032. Among the options, Vanguard will include the ability for investors to vote shares in accordance with management recommendations. The Texas AG’s office claimed that Vanguard “will for the first time offer proxy voting to investors,” calling it “a first for the industry.” In reality, proxy voting choice has been an ongoing area of focus across the industry well before and independent of Republican anti-ESG efforts; Vanguard had already adopted it as policy and was expanding it, and the other asset managers named in the suit run their own programs. Notably, “proxy voting choice” is not defined in the settlement, and the provision contains no specific guardrails or operational requirements, leaving open questions about enforceability. For larger asset managers, this is already the direction of travel – though proxy voting choice programs are costly and operationally complex, and many managers continue to rely on their own proxy voting guidelines and in part on proxy advisory firms such as ISS and Glass Lewis.
Passivity Commitments. The “passivity” provisions are perhaps the most noteworthy portion of the settlement, though they likely do not represent the sea change the Attorneys General have suggested. Vanguard agreed that its stewardship activities and proxy voting for U.S. equity investments will be pursued “solely to further the financial interests of investors,” defined as seeking the best long-term investment returns. In reality, this is simply a reiteration of long-standing fiduciary principles already understood to apply under federal and state law. As the industry has consistently maintained and demonstrated, ESG investing practices are grounded in the assessment of financially material risks and opportunities – not social or political agendas.
Among the specific commitments, Vanguard agreed it will not direct portfolio company business strategies, will not advocate that companies take particular courses of conduct to reduce carbon emissions, will not nominate directors or submit shareholder proposals, and will not solicit proxies. Vanguard also agreed to disclose its proxy voting record at least four times per year. Many of these reflect conduct already highly regulated by the SEC, including recent staff guidance clarifying when shareholder engagement may cross the line from passive investing into attempts to influence control. Importantly, the settlement preserves Vanguard’s ability to cast proxy votes and engage with directors and management on governance topics that protect or promote long-term shareholder value, including governance practices, board oversight, and disclosure of material risks required by the SEC. In short, these commitments largely track the boundaries the SEC already draws around passive fund stewardship and are consistent with standard industry practice and fiduciary principles.
One further provision is worth flagging: Vanguard agreed to withdraw from the Principles for Responsible Investment (PRI) and not participate in any organization that advocates for specific output or emissions targets or requires climate-focused investment commitments, such as NZAM, Ceres, or Climate Action 100+. This appears to be the real target of the settlement – restricting membership in industry coalitions rather than changing actual investment practices. This type of blanket prohibition on organizational participation raises significant First Amendment concerns and would likely face constitutional challenge were it not voluntarily agreed to. It underscores that the states’ primary objective appears to be dismantling participation in climate-focused organizations, more than altering day-to-day investment practices.
What This Means for Asset Managers. While the settlement has generated attention, its practical implications for the broader industry appear limited, even if the commitments sought from Vanguard become a target list that regulators seek to apply more broadly. The commitments are consistent with what the industry has long maintained: that investment stewardship is driven by fiduciary duty and long-term financial returns, not social or political objectives.
That said, asset managers should be mindful that the AGs may seek to use this settlement as leverage – pointing to a major market participant’s agreement as a basis to pursue similar concessions from other firms, potentially backed by the threat of investigation and/or litigation. If states pursue such actions, asset managers can take comfort that the concessions here reflect commitments that responsible fiduciaries have already embraced.
