A U.S. federal judge has denied motions to dismiss most of the claims in a multistate lawsuit accusing asset managers BlackRock, Vanguard and State Street of violating antitrust laws and conspiring to use sustainable investment initiatives to manipulate coal markets, allowing the case to proceed.
In statements received by ESG Today from the asset managers, Vanguard said that it was “disappointed in the court’s decision,” while BlackRock said that the “case is based on an absurd theory that coal companies conspired with their shareholders to reduce coal production.” State Street said that the lawsuit “remains baseless and without merit,” and focused on “efforts to advance a new and dangerous antitrust theory,” adding that it “poses unnecessary risk to investors and energy markets.”
The case, launched by Texas Attorney General Ken Paxton and joined by 10 other Republican states in late 2024, claimed that the asset managers acquired large shareholdings in major coal producers in the U.S., and used their combined influence to coerce the companies to cut coal production to accommodate clean energy investment goals, resulting in higher energy costs for U.S. consumers. Earlier this year, the U.S. Department of Justice and Federal Trade Commission issued a statement supporting the case, and adding that the Trump administration “has vowed to fight left-wing ideologues who seek to make us weaker and poorer under the guise of ESG. “
The suit alleges that the firms violated the Clayton Act, which prohibits the acquisition of shares of companies in which “the effect of such acquisition may be substantially to lessen competition,” and claims that the firms “effectively formed a syndicate and agreed to use their collective holdings of publicly traded coal companies to induce industry-wide output reductions,” by joining initiatives such as the Net Zero Asset Managers Initiative (NZAM) and Climate Action 100+, noting that each initiative requires commitments from asset managers to engage with portfolio companies to align with climate goals. Notably, the asset managers have all exited or significantly reduced their participation in the climate initiatives.
According to the ruling, the asset managers’ motions argued that as passive investors, they can’t be liable under the Clayton Act due to their stock purchases, and that the suit fails to allege a plausible agreement to harm competition.
In the ruling, however, U.S. District Judge Jeremy Kernodle said that the states’ claims “are not vague and conclusory but include dozens of specific examples of Defendants’ conduct supporting their theory,” noting as an example that the firms “allegedly joined certain “climate initiatives” in which they publicly committed to use their stock to “take necessary action on climate change” and “reduce greenhouse gas emissions.””
Kernodle added:
“Plaintiffs have identified enough circumstantial evidence to suggest that Defendants agreed to collectively pressure coal companies to reduce the output of coal in the relevant markets and disclose future output information.”
The ruling did point out, however, that the states “may ultimately be unable to prove” their claim that the asset managers used their stock holdings to decrease coal output,” or “that Defendants entered into an agreement to pressure the Coal Companies that led to anticompetitive effects in the relevant coal markets.” The ruling also noted that the states’ claims “lack direct evidence of a conspiracy,” and rely instead on the asset managers’ decisions to join the climate initiatives, and on circumstantial evidence, which the court conceded “is a close call.”
Texas Attorney General Ken Paxton called the ruling a “major victory against BlackRock, State Street, and Vanguard,” adding:
“BlackRock, State Street, and Vanguard—three of the most powerful financial corporations in the world—created an investment cartel to illegally control national energy markets and squeeze more money out of hardworking Americans. Today’s victory represents a major step in holding them accountable.”
In their statements, the asset managers said that they would continue to fight the allegations, with Vanguard saying that it “looks forward to the opportunity to vigorously defend against plaintiffs’ claims,” and State Street adding that “there is no collusion here, and we remain confident that the facts and legal substance are on our side,” while BlackRock said that “this case is not supported by the facts, and we will demonstrate that.”
BlackRock added:
“By pursuing forced divestment, the Attorneys General are undermining the Trump Administration’s goal of American energy independence. Forcing divestment will harm coal companies’ ability to access capital and invest in their businesses and jobs, likely leading to higher energy prices for Americans.”
