11 states sue biggest money managers over alleged coal collusion
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Coal barges. Photo: Justin Merriman/Bloomberg via Getty Images
A group of 11 states led by Texas sued some of the world's biggest money managers, alleging they illegally colluded to drive down the supply of coal and drive up the price of electricity.
Why it matters: The suit is one of the most aggressive moves yet against ESG (environmental, social and governance) investing, a major target of conservatives.
- Opposition to ESG investing and corporate DEI (diversity, equity and inclusion) initiatives often go hand-in-hand, and is strengthening in the wake of the election.
Catch up quick: The suit against BlackRock, Vanguard and State Street, filed in an east Texas federal court, alleges the money managers rolled up huge stakes in coal companies, and then worked together to advance environmental initiatives that meant producing less coal.
- "Rather than individually wield their shareholdings to reduce coal output, therefore, Defendants effectively formed a syndicate and agreed to use their collective holdings of publicly traded coal companies to induce industry-wide output reductions," the state plaintiffs wrote.
- The states allege the decreased supply has driven up the price of coal, which has fed through to higher utility costs, which in turn has forced their residents to pay higher electricity prices.
Zoom out: All three firms have participated in initiatives to gather money managers and use their influence to drive environmental policy.
- Vanguard was previously a member of Net Zero Asset Managers, formed to push for net-zero greenhouse gas emissions by 2050.
- It left NZAM in 2022 amid pressure on money managers over ESG investing. State Street and BlackRock remain signatories.
- BlackRock's international unit is also part of Climate Action 100+, a similar initiative (after the parent company pulled out and transferred the participation earlier this year).
- State Street pulled out of CA100+ earlier this year as well.
BlackRock in a statement characterized the theory behind the suit as "baseless." It said it is deeply invested in Texas' success, and that its investments are made on behalf of its clients with a focus on delivering financial returns, with its holdings regularly reviewed by federal and state regulators.
Representatives of Vanguard and State Street did not immediately respond for comment on the suit.
Editor's note: This story has been updated with details on BlackRock's and State Street's participation in climate groups.
