Texas Attorney General Ken Paxton. Photo: Diego M. Radzinschi/ALM
Last week, asset management firms BlackRock, State Street and Vanguard were sued by a group of 11 Republican states, led by Texas, for allegedly breaking antitrust laws by reducing coal production and boosting electricity prices through their investments, in the highest profile lawsuit yet against the beleaguered environmental, social and governance goals industry, seeking billions in damages.
In a complaint that marks the culmination of a years-long probe by GOP officials taking aim at Wall Street’s efforts to address climate change, Texas Attorney General Ken Paxton sued three of the largest institutional investors in the world, for conspiring to artificially constrict the market for coal through anticompetitive trade practices. This pressured coal companies to slash output and reduce carbon emissions from coal by more than 50% by 2030, driving up consumers’ utility bills, according to the lawsuit.
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“Over several years, the three asset managers acquired substantial stockholdings in every significant publicly held coal producer in the United States, thereby gaining the power to control the policies of the coal companies,” said Paxton in a statement. “Using their combined influence over the coal market, the investment cartel collectively announced in 2021 their commitment to weaponize their shares to pressure the coal companies to accommodate 'green energy' goals. To achieve this, the investment companies pushed to reduce coal output by more than half by 2030.”
“Texas will not tolerate the illegal weaponization of the financial industry in service of a destructive, politicized ‘environmental’ agenda. BlackRock, Vanguard, and State Street formed a cartel to rig the coal market, artificially reduce the energy supply, and raise prices,” said Paxton. “Their conspiracy has harmed American energy production and hurt consumers. This is a stunning violation of State and federal law.”
Last Wednesday’s complaint, which was filed in the federal court in Tyler, Texas, is among the highest profile lawsuits targeting efforts to promote environmental, social and governance goals, or ESG. The Republican-led states, including West Virginia and Montana, are asking the court to bar the three largest U.S. investment firms from using their stock in coal companies to vote on shareholder resolutions and take other steps in a way that restrains output and limits market competition.
Related: SEC fines Invesco Advisers $17.5M over ‘misleading’ ESG investing claims
GOP states are also in the process of challenging the Department of Labor’s ESG rule, resulting after the rule took effect in 2023. On July 9, 2024, 26 GOP-led states argued to a federal appellate panel to get the rule overturned.
However, since the Supreme Court overturned the Chevron case on June 28, which affects how federal agencies defer cases where Congressional statutes are ambiguous, the ESG case has now been sent back to the Texas district court. In November, the American Retirement Association filed to block the state AGs lawsuit.
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Lynn Cavanaugh
Lynn Varacalli Cavanaugh is Senior Editor, Retirement at BenefitsPRO. Prior, she was editor-in-chief of the What's New in Benefits & Compensation newsletter. She has worked for major firms in the employee benefits space, Vanguard and Willis Towers Watson, as well as top media companies, including Condé Nast and American Media.
