BlackRock, Vanguard and State Street Push to Dismiss Antitrust Lawsuit Over ESG Strategies

A group of the world’s most influential asset management firms including BlackRock, Vanguard and State Street is asking a federal judge to throw out a lawsuit brought by Republican-led states that accuses them of conspiring to curtail coal production under the guise of environmental initiatives, according to Bloomberg.

BlackRock Inc., Vanguard Group Inc., and State Street Corp.’s asset management division are facing allegations that they used coordinated environmental, social, and governance (ESG) strategies to exert pressure on coal producers to cut back output. The firms, which collectively oversee approximately $25 trillion in assets, are arguing that the case lacks substance and misrepresents their investment activities.

At a hearing scheduled for Monday, lawyers for the firms will contend that the suit, spearheaded by Texas Attorney General Ken Paxton, presents an implausible interpretation of antitrust laws. The case asserts that the asset managers, through their participation in climate-focused alliances, engaged in coordinated behavior amounting to a “syndicate” aimed at reducing coal production — a claim the companies strongly deny.

Per Bloomberg, the defendants say the case “spins a farfetched theory” unsupported by evidence and warn that a ruling against them could have sweeping implications for how investment firms operate in the U.S. markets. The Investment Company Institute, an industry trade group, has also voiced concern, saying the lawsuit could damage investor confidence and destabilize financial markets.

Presiding over the case is U.S. District Judge Jeremy Kernodle, a Trump appointee. Should the court side with the plaintiffs, the asset managers could face intensified legal scrutiny and may be compelled to divest from coal-related holdings, significantly altering their investment portfolios and strategies.

The stakes were heightened last month when officials from the Justice Department and Federal Trade Commission, both appointed during the Trump administration, filed statements supporting the progression of the lawsuit. A DOJ attorney is also expected to participate in Monday’s arguments, according to Bloomberg.

The lawsuit is part of a broader political and legal battle over ESG investing, with critics on the right alleging that firms are overstepping their bounds by using their influence to shape corporate behavior on environmental and social issues. The outcome of this case could set a precedent for how far asset managers can go in aligning portfolios with sustainability goals without running afoul of competition laws.

Source: Bloomberg