Vanguard has been facing pressure over ESG initiatives that offer investments aligned with certain environmental, social, or corporate governance factors that push a leftist political agenda. Vanguard withdrew from NZAM after a coalition of 13 state attorneys general filed a motion with the Federal Energy Regulatory Commission asking it to block Vanguard's request to extend its authorization to purchase large quantities of stock in public utilities. Hundreds of asset managers that have signed on to NAZM, argue that climate risks have become inextricably linked with companies' financial performance.

NZAM has 290 signatories, including BlackRock, State Street, JPMorgan Asset Management and London-based Legal & General, have enormous clout they can use to pressure energy companies into climate commitments. The signatories represent about $66 trillion in assets; the loss of Vanguard, the world's second-largest asset manager, puts a $7 trillion dent in that figure.

Vanguard said it is leaving the Net Zero Asset Managers initiative, an international carbon-reduction pact that has become a lightning rod for criticism of environmentally motivated investing.

The move comes as Vanguard has been facing intensifying political pressure over its ESG initiatives—efforts to offer investments aligned with certain environmental, social, or corporate governance factors.

In late November, a coalition of 13 state attorneys general filed a motion with the Federal Energy Regulatory Commission asking it to block Vanguard's request to extend its authorization to purchase large quantities of stock in public utilities.