BlackRock, Vanguard, and State Street Seek Dismissal of Texas Antitrust Suit

BlackRock, Vanguard, and State Street have petitioned a federal court in Texas to dismiss an antitrust lawsuit that accuses the investment giants of conspiring through climate initiatives to limit coal production. In their filing, the firms argued that the case is built on “half-baked and untested” legal theories and lacks substantive evidence of wrongdoing.

According to a statement included in the court filing, the companies contended that the plaintiffs’ claims require a significant distortion of antitrust law. “To find that Plaintiffs have stated an antitrust claim on these alleged facts requires contorting the law in a way that would hurt both coal companies and individual investors,” the firms asserted. They urged the court to reject what they described as an attempt to rewrite existing legal standards.

The lawsuit, led by Texas Attorney General Ken Paxton and supported by 12 other Republican-led states, is being closely watched by industry experts. Analysts have been eager to see how forcefully the defendants would counter what they describe as a groundbreaking legal challenge. According to a statement from legal scholar Michael Carrier of Rutgers Law School, the response from the asset managers delivers a “hard-hitting” rebuttal that highlights the absence of direct coordination among the firms, particularly in their proxy voting patterns.

Paxton’s office has not yet responded to requests for comment on the filing.

Read more: BlackRock, Vanguard and State Street Seek Dismissal of Texas Antitrust Lawsuit

The case is part of a broader wave of scrutiny from conservative political figures, particularly in states with strong energy sectors. Critics argue that the firms’ participation in climate-focused investment groups amounts to coordinated action against fossil fuel interests. With a collective portfolio exceeding $26 trillion, the three asset managers wield significant influence over corporate governance, shaping policies on executive compensation, board elections, and environmental, social, and governance (ESG) standards. However, amid mounting pressure from Republican officials, they have recently distanced themselves from some industry-wide climate initiatives.

This lawsuit marks the first major antitrust challenge against the firms related to their ESG policies. In their defense, the companies described their investment practices as “commonplace,” emphasizing that their approach aligns with providing cost-effective index funds that millions of Americans rely on for retirement savings and other financial goals.

The firms also pointed to evidence that coal production has actually increased since 2021, according to details in the plaintiffs’ own complaint. Additionally, they highlighted disparities in their proxy voting behavior, noting that while BlackRock and State Street voted against certain coal company board members, they did not act in unison, and the contested directors were ultimately re-elected. Vanguard, they added, had never opposed coal company leadership in its voting decisions.

“There is not the slightest indication that any Defendant was prodding the coal companies to reduce output, much less that all of them were doing so in collaboration,” the companies stated in their motion.

The case, titled Texas et al v. BlackRock Inc et al, is being heard in the U.S. District Court for the Eastern District of Texas under case number 24-00437.

Source: Insurance Journal