A coalition of 11 states, including Texas, has filed a lawsuit against BlackRock, State Street and Vanguard Group for allegedly “conspiring to artificially constrict the market for coal through anticompetitive trade practices.”
Texas Attorney General Ken Paxton said in a Nov. 27 release that over several years, the three aforementioned asset managers “acquired substantial stockholdings in every significant publicly held coal producer in the U.S., thereby gaining the power to control the policies of the coal companies.”
Using their combined influence over the coal market, Paxton said, 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 goal, the investment companies “pushed to reduce coal output by more than half by 2030,” Paxton said.
Blackrock, Vanguard and State Street used their memberships in the Climate Action 100 and the Net Zero Asset Managers Initiative to “signal their mutual intent to reduce the output of thermal coal, which predictably increased the cost of electricity for Americans,” Paxton added.
These firms, the Texas Attorney General claimed, also “deceived thousands of investors who elected to invest in non-ESG funds to maximize their profits.” Yet these funds, he noted, “pursued ESG strategies, notwithstanding the defendants’ representations to the contrary.”
The other plaintiffs in the suit comprise the attorneys general of Alabama, Arkansas, Indiana, Iowa, Kansas, Missouri, Montana, Nebraska, West Virginia and Wyoming. All 11 attorneys general in the suit are Republicans.
The suit, filed in U.S. District Court for the Eastern District of Texas, Tyler division, noted that the three defendants collectively own significant stakes in some of the largest U.S. coal producers. For example, the three big firms own 30.4% of Peabody Energy, 34.2% of Arch Resources, 29% of CONSOL Energy, and 24.9% of Vistra Energy, the suit noted.
The suit also alleges that the defendants “used the shares they acquired in the coal companies to coerce those companies to reduce their collective output of coal. They have done so by using those shares to gain access to, obtain information from, and coerce the management of the coal companies to agree to reduce their companies’ level of output. They have voted their shares both to coerce compliance with their demands and to threaten removal of management that proved reluctant to cooperate with this output reduction scheme.”
Thus, the plaintiffs asked the court to prohibit the three asset managers from using their shares in coal companies to vote on shareholder resolutions, and to initiate other steps to prevent this “restraint of trade and commerce.”
Paxton added in the release that this “conspiracy violated multiple federal laws that prevent a major shareholder, or a group of shareholders, from using their shares to lessen competition or engaging in other anticompetitive schemes.” In addition, the three companies broke Texas antitrust and deceptive trade practices laws, Paxton said.
A spokesperson for BlackRock said the company’s holdings in energy companies are regularly reviewed by federal and state regulators.
“We make these investments on behalf of our clients, and our focus is on delivering them financial returns,” the spokesperson said. “The suggestion that BlackRock has invested money in companies with the goal of harming those companies is baseless and defies common sense. This lawsuit undermines Texas' pro-business reputation and discourages investments in the companies consumers rely on.”
The spokesperson added that BlackRock is “deeply invested in Texas' success,” noting the firm has "billions invested in Texas energy, partnering with the state to attract investments into the Texas power grid and helping millions of Texans retire with dignity.”
A spokesperson for State Street said the firm “acts in the long-term financial interests of investors with a focus on enhancing shareholder value. As long-term capital providers, we have a mutual interest in the long-term success of our portfolio companies. This lawsuit is baseless, and (we) look forward to presenting the facts through the legal process.”
Vanguard could not be immediately reached for comment.
BlackRock, Vanguard and State Street have total assets under management of $11.5 trillion, $10.1 trillion and $4.1 trillion, respectively.
