A lawsuit by 12 states claiming BlackRock, State Street and Vanguard conspired to reduce coal production has received a boost from the federal Department of Justice and Federal Trade Commission.
The Trump administration agencies have taken legal action supporting the states’ suit, which alleges the financial giants conspired to manipulate the coal market through “anticompetitive trade practices,” according to a news release from Texas Attorney General Ken Paxton.
A document filed by the FTC alleges that large institutional asset managers with holdings in coal companies used their influence to reduce U.S. coal production below competitive levels. That increased energy prices paid to U.S. consumers and businesses and generated “supra-competitive” profits for those investors, the FTC alleges.
Paxton claimed the asset management giants were illegally “weaponizing” the financial industry in pursuit of a “destructive green energy ideology.”
BlackRock responded that the case is based on “an absurd theory that coal companies conspired with their shareholders to reduce coal production.” Forcing asset managers to divest from coal companies will likely lead to higher prices by decreasing their ability to access capital and invest in their businesses and employees, BlackRock said in a statement.
Filed in November 2024, Paxton’s lawsuit says BlackRock, State Street and Vanguard sought to halve coal output by 2030, violating state and federal laws against anticompetitive schemes and deceptive trade practices.
Like many asset managers, BlackRock, State Street and Vanguard have to varying degrees offered ESG — environmental, social and government — investment options, including those that seek to reduce emissions of climate-altering greenhouse gasses.
The FTC filing claimed the asset managers went beyond what is permissible: “Advocating that companies have good governance structures and processes is different from pushing for specific operational or strategic decisions that reduce a company’s competitive intensity,” the FTC said.
The asset managers pledged to use their coal company shareholdings to reduce carbon emissions by joining the Net Zero Asset Managers Initiative, which required members to pursue “decarbonisation goals” to reach net zero emissions by 2050 for all assets under their management, according to the FTC.
Their actions restricted coal output, even during periods of high prices, while increasing profits, the commission alleges.
