Paxton and the coalition have filed a complaint in the U.S. Eastern District Court of Texas and have demanded a jury trial, according to the filing. Texas has been joined by Alabama, Arkansas, Indiana, Iowa, Kansas, Missouri, Montana, Nebraska, West Virginia, and Wyoming in the suit. The lawsuit accuses the three asset managers of violating the Sherman Act and Clayton Act, which govern antitrust law, as well as state antitrust laws from Texas, Montana, and West Virginia.
The states have highlighted that the three companies collectively hold significant stakes in public coal producing companies, indicating their combined influence. Furthermore, they have been associated with climate coalitions such as Climate Action 100+ and the Net Zero Asset Managers initiative, which require them to make emissions reductions commitments. The lawsuit argues that the combination of their holdings, membership commitments, and influence poses a significant risk to competition in the relevant markets.
State Street left CA100+ in February, while BlackRock transferred its membership to an international arm of the business during the same period. Although Vanguard was not a CA100+ member, all three companies were previously part of the Net Zero Asset Managers initiative until Vanguard withdrew in 2022.
“For the past four years, America’s coal producers have been responding not to the price signals of the free market, but to the commands of Larry Fink, BlackRock’s Chairman and CEO, and his fellow asset managers,” the lawsuit said. “As demand for the electricity Americans need to heat their homes and power their businesses has gone up, the supply of the coal used to generate that electricity has been artificially depressed — and the price has skyrocketed.”
According to the lawsuit, the three asset managers collectively hold more than 30% of the outstanding stocks in Peabody Energy and Arch Resources, which account for 17% and 13% of U.S. coal production, respectively. Individually, the three managers own between 15% and 6.4% of Arch Resources shares and between 5% and 13.6% of Peabody Energy shares. The lawsuit alleges that these firms are utilizing their influence gained through their stock holdings to exert pressure on coal companies, urging them to reduce their output in line with the asset managers’ net-zero objectives.
The states claimed that by actively working with the companies to encourage them to reduce their greenhouse gas emissions, they were able to exert pressure on the companies. As a direct result of this pressure, the coal companies made significant reductions in their output and also provided more detailed disclosures regarding their impact on the climate.
State Street and BlackRock have both responded to the lawsuit, issuing separate statements on Monday.
State Street has stated that the company prioritizes the long-term financial interests of investors. They express their anticipation of presenting the facts through the legal process.
State Street responded to the lawsuit, stating, “As long-term capital providers, we have a mutual interest in the long-term success of our portfolio companies. This lawsuit is baseless.”
BlackRock has expressed its deep investment in the success of Texas. The company emphasized that it regularly reviews its holdings in energy companies, as per the scrutiny of federal and state regulators.
BlackRock strongly denies the suggestion that it has invested money in companies with the intention of causing harm. The firm asserts that such claims are baseless and go against common sense. Additionally, BlackRock argues that this lawsuit not only damages Texas’ reputation as a pro-business state but also discourages investments in the very companies that consumers depend on.
Texas and other Republican attorneys general have singled out BlackRock as a prime target in their efforts against ESG (Environmental, Social, and Governance) actions. In fact, the state’s Permanent School Fund withdrew over $8.5 billion from the firm earlier this year.
The House Judiciary Committee’s interim report accused the three asset managers, along with other members of climate coalitions like CA100+, of forming a “climate cartel” and colluding on decarbonization. This report is part of a long-running investigation into whether these climate coalitions violate antitrust laws. However, witnesses called to testify during a hearing refuted these claims and discussed the findings of the report.
