Find out more with free updates
Briefly write to The value of ESG shares myFT Digest – delivered straight to your inbox.
Texas and 10 other Republican-led states are suing BlackRock, State Street and Vanguard, alleging they conspired to cut coal to advance a “destructive and political agenda”.
A federal antitrust lawsuit accuses the managers of a major US index fund of using their holdings in coal producers to cut output and raise prices to meet zero-emissions goals.
The lawsuit, filed on Wednesday, marks the latest effort by state Republicans as they wage their war on what conservatives call “woke capitalism”.
Attorney General Ken Paxton said: “Texas cannot tolerate the use of illegal weapons for environmental and political purposes.”
“Their scheme has destroyed American electricity generation and harmed consumers. This is a flagrant violation of state and federal law.”
BlackRock responded to the lawsuit, saying, “The idea that BlackRock has invested in companies with the intention of harming these companies is absurd and unconscionable. This lawsuit tarnishes Texas’ pro-business reputation and discourages investing in companies that consumers rely on.”
Vanguard and State Street did not immediately respond to a request for comment. They have previously stated that their environmental performance is part of their legal responsibility to maximize long-term returns.
The lawsuit is the latest in a three-year battle that has seen Republican politicians boycott BlackRock and other fund managers because of their perceived “antipathy” to fossil fuels, and seek to force deeper scrutiny of their companies and banks and energy companies.
The lawsuit pointed to asset managers’ participation in programs including Climate Action 100+ and The Net Zero Asset Managers Initiative as evidence that they “conspired to use their group of publicly traded coal companies to reduce corporate emissions”.
Vanguard left NZAM in 2022 and did not belong to the Climate Action 100+. State Street and America’s BlackRock have pulled out of the Climate Action 100+ this year, citing legal concerns that the group’s increasing use of coal is at odds with its customer service obligations.
Since 2021, all three financial companies have been very skeptical about their shareholdings and want to impose environmental problems on the company’s managers.
The states say their holdings in the listed US coal industry – including a 30 percent stake in Peabody Energy and 34 percent in Arch Resources – give them “force power to manage the inevitable”.
Coal-fired plants provided about 13 percent of Texas’ electricity last year. Other states that joined the lawsuit, including Missouri, West Virginia and Wyoming, rely heavily on coal for electricity.
The lawsuit said the companies used their assets to “support a plan to reduce emissions, which has restricted the supply of coal, significantly reduced competition in coal markets, increased electricity prices for American consumers, and created cartel profits”.
To support their case, the countries also referred to an idea and the chairman of the Federal Trade Commission Lina Khan where he said that “antitrust laws do not allow us to look at an illegal practice because the parties have committed themselves to some unfair advantage”.
While the lawsuit blames rising coal prices on investment managers, the latest increase came in early 2022 after Russia annexed Ukraine. Prices have fallen sharply, although not yet to the multi-year lows of early 2020.
The case comes as a new generation of Republicans seeks to use antitrust as a way to advance right-button issues, such as online platforms that are allegedly suppressing dissent.
They feel that antitrust is a way to reduce issues like freedom of speech compared to government laws that they may consider to be burdensome.
Texas, the US’s second-largest economy — and the nation’s leading producer of clean energy and oil and gas — has struggled in recent years. amid the influx of companies to the stateflexing its economic power to attack companies because of their political behavior.
In March, the Texas state fund pulled $8.5bn in assets from BlackRock after it was blacklisted for discriminating against the oil and gas industry. BlackRock said at the time that the move “put short-term political . . . a long-term fiduciary role”.
Additional reports by Madison Darbyshire in New York
Climate Capital
Where climate change meets business, markets and politics. See the FT news here.
Are you curious about FT’s environmental commitment? Learn more about our science-based goals here
Leave a Reply