BlackRock, Vanguard, and State Street sued in Republican anti-ESG action

Nearly a dozen Republican-led states, including Texas, have filed a federal lawsuit against BlackRock, Vanguard, and State Street, accusing the firms of exerting illegal influence on energy companies in pursuit of climate advocacies.

According to the landmark complaint filed Wednesday in federal court in Tyler, Texas, the firms leveraged their market influence for years in climate advocacy initiatives to push ESG objectives, which resulted in higher energy costs for consumers.

The case, Texas et al v BlackRock Inc et al, was filed in the US District Court for the Eastern District of Texas.

The 11 states involved in the lawsuit – Texas, Alabama, Arkansas, Indiana, Iowa, Kansas, Missouri, Montana, Nebraska, West Virginia, and Wyoming – argued that the companies’ actions, including a goal to cut carbon emissions from coal by more than half by 2030, undermine market competition. 

“Competitive markets – not the dictates of far-flung asset managers – should determine the price Americans pay for electricity,” the complaint stated.

As reported by Reuters, the lawsuit represents a bold statement against three of the industry's largest players as BlackRock, Vanguard, and State Street together manage over $26 trillion in assets.

The coalition also panned the companies for their involvement in groups such as the Net Zero Asset Managers Initiative and Climate Action 100+, organizations that advocate for reducing carbon emissions. While Vanguard walked away from the Net Zero initiative in 2022, while BlackRock and State Street exited Climate Action 100+ earlier this year, they claim these withdrawals do not eliminate the risk of continued pressure on coal companies.

The complaint highlights the firms’ significant stakes in nine coal companies, including a 34.2 percent share in Arch Resources and 30.4 percent in Peabody Energy, the two largest publicly traded US coal producers.

BlackRock was also accused of misleading investors about its non-ESG funds, allegedly using them to advance climate objectives while claiming they were focused on shareholder returns.

The states seek to block the asset managers from using their stakes to influence shareholder resolutions or take other steps they claim could suppress coal production. The lawsuit also demands civil penalties for alleged violations of federal antitrust and Texas consumer protection laws.

In a press release Wednesday morning, the law firm of Tony Buzbee, a Texas-based attorney acting as outside lead counsel for the prosecution, described the three asset managers as an "investment cartel" who collectively acted against coal companies to accommodate green energy goals.

"The total recovery in this case could amount to billions of dollars," Buzzbee said in the statement. "I am proud to stand with Attorney General Paxton on behalf of the State of Texas to right this injustice and to seek relief for the citizens of the great State of Texas."

The Lone Star state has stood out for its fierce anti-ESG stance, with one study suggesting a pair of laws it passed in 2021 has led to more than $700 million in lost  economic opportunity.