US Republican states sue BlackRock over “destructive” green agenda

November 30, 2024

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Texas and 10 other Republican-led states are suing BlackRock, State Street and Vanguard, claiming they conspired to cut coal supplies to advance “a destructive, politicized environmental agenda.”

The federal antitrust lawsuit accuses the three largest U.S. index fund managers of using their stakes in coal producers to restrict supply and drive up prices to achieve net-zero carbon emissions.

The lawsuit filed Wednesday marks the latest attempt by Republican states to escalate their war against what conservatives call “woke capitalism.”

“Texas will not tolerate the illegal weaponization of the financial industry in service of a destructive, politicized environmental agenda,” said Attorney General Ken Paxton.

“Their conspiracy has harmed American energy production and harmed consumers. This is a blatant violation of state and federal law.”

BlackRock responded to the lawsuit by saying, “The allegation that BlackRock invested money in companies to harm those companies is baseless and defies common sense.” This lawsuit undermines Texas’s pro-business reputation and discourages investment in the business “Companies that consumers rely on.”

Vanguard and State Street did not immediately respond to requests for comment. They have previously argued that their stance on environmental issues is part of their legal obligation to maximize long-term returns.

The lawsuit is the latest salvo in a three-year battle that has seen Republican politicians boycott BlackRock and other money managers over what they say are “hostile” to fossil fuels and seeking to impose tighter controls on their holdings as well as banks and energy companies.

The lawsuit pointed to the asset managers’ participation in programs such as Climate Action 100+ and the Net Zero Asset Managers initiative as evidence that they “agreed to use their collective holdings of publicly traded coal companies to effect industry-wide production reductions.”

Vanguard left NZAM in 2022 and was never part of Climate Action 100+. The American arm of State Street and BlackRock left Climate Action 100+ this year, citing legal concerns that the groups’ increasingly strong position in the coal industry conflicted with their fiduciary duty to customers.

Since 2021, all three investment companies have become increasingly skeptical of shareholder proposals that seek to impose environmental regulations on company executives.

The states claim that the companies’ holdings in the largest publicly traded U.S. coal producers — including a combined 30 percent stake in Peabody Energy and a 34 percent stake in Arch Resources — give them “almost irresistible management power.” to force”.

Coal-fired power plants provided about 13 percent of Texas’ electricity last year. Some other states that have joined the lawsuit, including Missouri, West Virginia and Wyoming, rely more heavily on coal for their electricity.

The lawsuit said the companies used their shares to “facilitate a production reduction program that artificially restricted the supply of coal, significantly reduced competition in coal markets, increased energy prices for American consumers and reaped antitrust profits.”

To support their case, the states also cited an opinion piece by Federal Trade Commission Chairwoman Lina Khan in which she said, “Antitrust laws do not allow us to turn a blind eye to an illegal transaction just because the parties have agreed.” undertake the associated social benefit.” “.

Although the lawsuit blames money managers for higher coal prices, most of the recent increases came in early 2022 following Russia’s invasion of Ukraine. Since then, prices have fallen sharply, although not quite to the multi-year lows of early 2020.

The lawsuit comes at a time when a new generation of populist Republicans have sought to use antitrust law as a tool to advance right-wing issues, such as online platforms that allegedly censor conservative voices.

They view antitrust law as a gentler tool for addressing issues such as free speech compared to government regulation, which is viewed as more burdensome.

Texas, the second-largest economy in the U.S. — and the nation’s leading producer of clean energy and oil and gas — has been particularly tough in recent years amid an influx of companies into the state, flexing its economic muscles to take advantage of companies because of theirs to attack political positions.

In March, a Texas sovereign wealth fund withdrew $8.5 billion in assets from BlackRock after blacklisting the company for alleged discrimination against oil and gas companies. BlackRock said at the time that the move “ditched short-term politics.” . . long-term fiduciary responsibility.”

Additional reporting by Madison Darbyshire in New York