Investment manager Vanguard has agreed to pay $29.5 million, and to take a series of steps to avoid imposing ESG goals on portfolio companies, to settle a multi-state lawsuit that alleged that it conspired with BlackRock and State Street to use sustainable investment initiatives to manipulate coal markets.
In a statement announcing the settlement, Texas Attorney Ken Paxton, who launched the suit in 2024, called the agreement with Vanguard “historic” and “industry-changing,” adding that it “represents one of the most significant enforcement actions ever taken against coordinated ESG-driven market manipulation.”
The case, initiated by Paxton and joined by 10 other Republican states, 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. In May 2025, 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 alleged 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.
The settlement outlined a series of “passivity commitments” by Vanguard designed to restrict the pursuit of ESG goals by the asset manager, including a pledge to “not advocate to any portfolio company that it take any particular course of conduct to reduce carbon emissions,” or to “dispose or threaten to dispose of securities of portfolio companies as a condition or inducement of specific action or nonaction.”
Vanguard also agreed in the settlement to withdraw from UN-backed responsible investing organization Principles for Responsible Investment (PRI), although the asset manager had already announced in November that it would remove its U.S. business from the PRI. The asset manager also agreed to make proxy voting choice available to investors in funds accounting for at least 50% percent of assets invested in U.S. Vanguard-advised equity funds.
The settlement specified that Vanguard did not admit to any wrongdoing, and that it was being made “solely for the purpose of avoiding the burden and expense of litigation.”
BlackRock and State Street have not announced settlements in the case. In prior comments on the lawsuit, BlackRock said that the “case is based on an absurd theory that coal companies conspired with their shareholders to reduce coal production,” while State Street called it “baseless and without merit,” and said that it focused on “efforts to advance a new and dangerous antitrust theory,” and “poses unnecessary risk to investors and energy markets.”
While praising Vanguard’s settlement as setting “a new standard for institutional investors that every company should follow,” Texas AG Paxton said that “Blackrock and State Street have continued to ignore state laws, engage in anticompetitive schemes that hurt American energy, and undermine those who use their services to invest.”
