Big Three Asset Managers Face GOP Climate Conspiracy Lawsuit
A Texas federal judge has ruled that a lawsuit challenging three of the world’s largest investment firms over their climate-related activities can move forward, rejecting the companies’ attempts to dismiss the case at an early stage. The lawsuit, filed by eleven Republican state attorneys general led by Texas’s Ken Paxton, targets BlackRock, State Street, and Vanguard for their participation in climate initiatives aimed at reducing greenhouse gas emissions. The states argue these activities constitute an illegal conspiracy that has harmed coal markets and increased energy costs for consumers.
Market Influence Through Stock Ownership
U.S. District Judge Jeremy Kernodle found that the three asset managers collectively own substantial portions of major coal companies—between roughly 25% and 35% of most publicly traded coal producers. This ownership gives them considerable influence over company operations through proxy voting and direct engagement with management.
The plaintiffs presented evidence that coal production decreased while prices increased between 2019 and 2022, despite market conditions that would typically encourage higher output. During this period, the asset managers were participating in climate initiatives that committed them to pressuring portfolio companies to reduce carbon emissions.
The judge noted that thermal coal output by these companies fell 19.2% while prices rose 25.5% over the three-year period. Similarly, South Powder River Basin coal output dropped 18.2% as prices increased 21.2%. Privately held coal companies not owned by the defendants increased production during the same period.
Climate Initiative Participation
The case focuses on the defendants’ membership in organizations like Climate Action 100+ and the Net Zero Asset Managers Initiative. These groups coordinate investor efforts to push companies toward emissions reductions, with stated goals of achieving “net zero emissions by 2050 or sooner.”
According to court documents, these initiatives explicitly acknowledged that reaching net zero requires “coal production declines towards zero”. Members committed to using “clear escalation and voting policy” to pressure companies and to “immediately cease all financial or other support to coal companies” seeking to expand production.
Legal Theory Tested
Judge Kernodle acknowledged the case presents an unusual antitrust theory. Rather than competitors directly agreeing to restrict output—which would be clearly illegal—the lawsuit alleges that investors coordinated to pressure companies in another industry to reduce production.
The court found sufficient circumstantial evidence to support the conspiracy claims, including the timing of the defendants’ participation in climate initiatives and their parallel actions in voting against coal company directors who lacked adequate climate disclosures.
Consumer Protection Claims
The ruling also allows consumer protection claims against BlackRock to proceed in four states. These allegations focus on BlackRock’s marketing of certain investment funds as not following environmental, social, and governance (ESG) strategies while allegedly using those funds to advance climate objectives.
Plaintiffs argue that investors who specifically sought non-ESG funds were misled about how their investments would be used. BlackRock had claimed these funds “do not seek to follow a sustainable, impact or ESG investment strategy“, but the states contend the company was simultaneously using proxy votes from these funds to pressure companies on climate issues.
Industry Response
The defendants have denied wrongdoing and characterized their activities as standard investment stewardship rather than anticompetitive coordination. Vanguard stated it would “vigorously defend” against the claims, while State Street called the lawsuit “baseless” and warned it poses “unnecessary risk to investors and energy markets”.
Broader Context
The case represents part of a broader political battle over ESG investing practices. Republican officials have increasingly challenged investment strategies that consider environmental and social factors, arguing they prioritize political objectives over financial returns.
The litigation could influence how asset managers coordinate on climate issues and engage with portfolio companies on environmental matters. While the ruling only allows the case to proceed rather than determining liability, it signals that courts will examine whether coordinated climate initiatives among major investors may violate antitrust laws.
The case will now move to discovery, where both sides will gather evidence to support their positions on whether the defendants’ activities constituted illegal coordination or legitimate investment stewardship.
Founder and Managing Partner of Skarbiec Law Firm, recognized by Dziennik Gazeta Prawna as one of the best tax advisory firms in Poland (2023, 2024). Legal advisor with 19 years of experience, serving Forbes-listed entrepreneurs and innovative start-ups. One of the most frequently quoted experts on commercial and tax law in the Polish media, regularly publishing in Rzeczpospolita, Gazeta Wyborcza, and Dziennik Gazeta Prawna. Author of the publication “AI Decoding Satoshi Nakamoto. Artificial Intelligence on the Trail of Bitcoin’s Creator” and co-author of the award-winning book “Bezpieczeństwo współczesnej firmy” (Security of a Modern Company). LinkedIn profile: 17,000 followers, 4 million views per year. Awards: 4-time winner of the European Medal, Golden Statuette of the Polish Business Leader, title of “International Tax Planning Law Firm of the Year in Poland.” He specializes in strategic legal consulting, tax planning, and crisis management for business.
