A judge in Texas recently made headlines by rejecting an attempt by BlackRock, State Street, and Vanguard to dismiss a lawsuit filed against them by the state of Texas. The lawsuit claims that these firms were part of a scheme to limit the coal market through anti-competitive practices. Will Hild, the executive director of Consumers’ Research, celebrated this decision, describing it as a victory for consumers and a setback for what he calls “woke asset managers.”
In another move against Environmental, Social, and Governance (ESG) criteria, 26 state financial officers sent a letter to BlackRock and 16 other companies. They demanded these firms prove that ESG no longer influences their business decisions if they wish to continue operations in those states. ESG is often seen as a framework for managing business risks and opportunities related to environmental and social factors, extending beyond mere environmental concerns.
When the lawsuit was initially filed, a BlackRock spokesperson dismissed the allegations as “baseless.” The spokesperson emphasized the company’s significant investments in Texas, stating that they have billions invested in the state’s energy sector. This investment, BlackRock argues, supports the state’s power grid and helps Texans achieve secure retirements.
The lawsuit accuses these asset managers of holding substantial shares in every major publicly traded coal producer in the U.S. This, according to the lawsuit, allowed them to influence company policies and pressure them into adopting emission reduction goals. The goal, as outlined, was to cut coal production by more than half by 2030.
In their defense, the firms argued that the lawsuit presents a “farfetched theory.” They claimed it misconstrues the law in ways that could harm both coal companies and individual investors. The motion further claimed there is no evidence of coordinated actions or communications among the defendants to substantiate the alleged conspiracy.
The motion also highlighted that the complaint fails to provide details on the decision-making processes of coal companies. According to the defendants, there is no evidence that these decisions were coordinated. They also pointed out that coal production increased during the alleged conspiracy period.
Judge Jeremy Kernodle, appointed by President Trump, found enough evidence to support the claims in the lawsuit. He noted that the allegations are detailed, citing numerous examples backing the plaintiff’s argument. According to the judge, the defendants publicly committed to climate initiatives that aimed to use their stock influence to reduce greenhouse gas emissions.
These commitments, according to the lawsuit, included goals for net-zero emissions, which would drastically cut coal production. The firms allegedly vowed to stop supporting coal companies that increased production. Public statements by BlackRock and Vanguard reportedly confirmed these intentions.
In addition to the lawsuit, these firms received a letter from 21 state financial officers threatening blacklisting unless they prove their departure from ESG practices. The letter criticized large financial institutions for using their influence to push political agendas outside the scope of financial materiality. It also acknowledged that some firms are stepping back from global climate coalitions but insisted more needs to be done.
The letter outlined specific actions these firms must take to demonstrate they are no longer implementing ESG in their decisions. These demands include ensuring that their investment decisions prioritize shareholder value over political agendas. The letter was firm in its stance, insisting that citizens’ investments should not be used to push international political agendas.
Interestingly, Texas was not part of the group of states making these demands. According to The Wall Street Journal, Texas removed BlackRock from its blacklist back in June. However, Hild from Consumers’ Research remains skeptical about BlackRock’s true intentions regarding ESG.
Hild accused BlackRock of deceit, claiming they are trying to appease conservatives while still pursuing their activist agenda. He emphasized that the firm has no plans to prioritize fiduciary responsibility over politics. Hild’s statement reflects a broader suspicion toward BlackRock’s commitments.
The letter set a deadline for the involved firms to communicate directly with state financial officers by September 1. It urges them to commit to a financial model focused on integrity rather than political advocacy. The officers insisted that this is what public servants, retirees, and taxpayers rightfully deserve.
