BlackRock, led by Larry Fink, fails in attempt to dismiss allegations of collusion related to climate issues in Texas
In a significant development, a US judge has partially denied a request by BlackRock and other top asset managers to dismiss a lawsuit filed by Texas and 12 other Republican-led states. The ruling by Judge Kernodle allows the states to proceed with their claims that the asset managers violated US antitrust law [1][2][3].
The violation, according to the states, occurred through the companies' participation in Climate Action 100+, an investor initiative to combat climate change. The lawsuit alleges that the companies conspired to use their significant shareholdings to pressure coal companies to reduce coal production as part of climate-related investment initiatives, which allegedly violated antitrust laws by manipulating the coal market and raising energy costs for consumers [1][5].
The judge agreed to dismiss only three of the 21 counts in the states' lawsuit. The lawsuit names institutional investors BlackRock, State Street, and Vanguard as defendants. The representatives for the companies did not immediately respond to requests for comment [1].
The outcome of this lawsuit could significantly impact how the companies approach their holdings and passive funds, managing a combined total of $27 trillion. One potential remedy sought by the plaintiffs is for the fund firms to divest holdings in coal companies, a measure BlackRock has stated could harm companies' access to capital and potentially raise energy prices [1].
This case is one of the highest-profile cases targeting efforts to promote environmental, social, and governance (ESG) goals. It is being led by Republican-led states and could lead to increased legal scrutiny on climate-related activism in investing [5]. The ruling indicates that shareholder activism focused on climate goals—including participation in initiatives like Climate Action 100+—may face legal challenges if deemed to have anticompetitive effects. This could constrain asset managers’ ability to use proxy voting and engagement to drive corporate climate action, especially in sectors like fossil fuels [1][5].
The potential chilling effect on ESG investing and passive fund strategies is another key implication. Because BlackRock and others use large passive fund holdings to vote on ESG matters, the lawsuit raises the risk that activist climate policies embedded in these funds might be challenged on antitrust grounds. This may lead firms to reassess or pull back from aggressive climate or net-zero commitments to avoid liability [4][5].
The judge's ruling was made on Friday. The companies have denied wrongdoing and referred to the case as "half-baked" [1]. The case is targeting the companies' climate activism and its impact on coal production and energy prices. It remains to be seen how this development will shape the future of climate-related investment strategies and the role of asset managers in driving corporate climate action.
- The violation of antitrust laws, as alleged by the states, involves the companies' participation in Climate Action 100+, a media-covered investor initiative aimed at combating climate change, which is part of the general-news sector.
- The judge's ruling could significantly impact the finance and business strategies of institutional investors like BlackRock, State Street, and Vanguard, as it may constrain their ability to use proxy voting and engagement to drive corporate climate action, particularly in sectors like fossil fuels.
- Political implications of the lawsuit include increased scrutiny on climate-related activism in investing, as it is being led by Republican-led states and could potentially discourage asset managers from making aggressive climate or net-zero commitments to avoid legal challenges.
