The Republican battle against ESG investing intensifies as a coalition of 11 states, led by Texas, files a lawsuit against Vanguard Group, BlackRock, and State Street Corp. The states claim these asset managers undermined the coal market through ESG-driven strategies, causing energy prices to rise for consumers.
Texas Attorney General Ken Paxton’s office brands the three firms as an “investment cartel.” The lawsuit alleges they leveraged their significant stakes in publicly traded coal companies to pressure these firms into pivoting away from coal toward greener energy solutions. This transition, according to the states, resulted in reduced coal production and higher electricity costs for consumers.
“Texas will not stand by as the financial sector weaponizes itself to further a politicized and destructive ‘environmental’ agenda,” says Paxton. “BlackRock, Vanguard, and State Street conspired to rig the coal market, slash energy supply, and inflate prices.”
Both BlackRock and State Street quickly dismissed the accusations as unfounded.
“BlackRock is deeply committed to Texas’ success,” the company states, highlighting its multi-billion-dollar investments in Texas energy companies, all subject to regular regulatory reviews. “The claim that BlackRock would harm its own investments is illogical and baseless. This lawsuit damages Texas’ reputation as a pro-business state and deters future investment in vital industries.”
State Street echoes this sentiment, emphasizing its long-term approach. “Our goal is to enhance shareholder value and act in the best financial interests of our clients,” the company says. “We have a vested interest in the sustained success of our portfolio companies.”
Vanguard has not yet commented on the matter.
This legal action marks another escalation in the politically charged debate over ESG investing, particularly its environmental component. Critics argue ESG factors distract asset managers from their primary objective: maximizing returns.
States like Texas, West Virginia, and Florida have implemented measures barring state pension funds from considering ESG principles. Some have even prohibited specific asset managers from handling state funds. BlackRock, a frequent target, was sued by Tennessee’s attorney general last year for allegedly misrepresenting its investment strategies.
However, the Texas-led lawsuit takes a bolder step. It accuses the asset managers of actively colluding to suppress the coal industry, a move the states argue constitutes anticompetitive behavior.
Joining Texas in the lawsuit are Alabama, Arkansas, Indiana, Iowa, Kansas, Missouri, Montana, Nebraska, West Virginia, and Wyoming.
