Remember the lawsuit Texas and other states filed against BlackRock and other companies for prioritizing Environmental Social Governance (ESG) over shareholder return? The case is now moving forward.
A Texas federal judge will allow a lawsuit to proceed wherein a coalition of states, including Texas, sued the world’s largest asset managers for allegedly engaging in antitrust violations and consumer protection practices.
Texas and 12 other Republican-led states filed suit against BlackRock, Vanguard, and State Street, accusing them of using their “collective power — by proxy voting and otherwise — to pressure the major coal producers to reduce production of coal, and in particular production of the thermal coal used to generate the electricity that powers American homes and businesses.”
The lawsuit alleges that the firms “routinely violated its pledge to investors” by using their holdings to invest and advance “climate goals” as well as environmental, social, and governance (ESG) issues. “Rather than individually wield their shareholdings to reduce coal output, therefore,” the lawsuit asserts, “Defendants effectively formed a syndicate and agreed to use their collective holdings of publicly traded coal companies to induce industry-wide output reductions.”
Judge Jeremy Kernodle of the Eastern District of Texas dismissed, in part, motions by the investing firms to dismiss the case, stating that the states “have identified enough circumstantial evidence to suggest that Defendants agreed to collectively pressure coal companies to reduce the output of coal in the relevant markets and disclose future output information.”
The motion to dismiss from BlackRock, Vanguard, and State Street was filed back in March, calling the grounds for the lawsuit “based on half-baked and untested theories.”
“We make these investments on behalf of our clients, and our focus is on delivering them financial returns,” Blackrock told The Texan in December last year, after the initial lawsuit was filed.
“The suggestion that BlackRock has invested money in companies with the goal of harming those companies is baseless and defies common sense. This lawsuit undermines Texas’ pro-business reputation and discourages investments in the companies consumers rely on.”
In May, the Department of Justice (DOJ) and Federal Trade Commission (FTC) filed a “statement of interest” supporting the claims against BlackRock, Vanguard, and State Street, stating that the case “alleges not merely typical investor behavior, but the active, anticompetitive use of common shareholdings to reduce the production of American coal to the detriment of American consumers and businesses.”
“In sum,” Kernodle writes in the order, “it is plausible that Defendants did what they publicly said they were going to do: use their stock to decrease the output of coal.”
With Kernodle’s order, the suit will proceed with discovery and a trial to determine whether these major investment managers violated antitrust and consumer deception laws.
“BlackRock, State Street, and Vanguard — three of the most powerful financial corporations in the world — created an investment cartel to illegally control national energy markets and squeeze more money out of hardworking Americans,” Attorney General Ken Paxton wrote in a press release following the order by Kernodle.
Being a large investment company with literally trillions in assets, BlackRock has a lot of fingers in a lot of different pies. Despite being on the receiving end of a potentially very expensive, Texas-led lawsuit, they’re also opening a stock exchange in Texas and has a stock fund based solely on Texas companies. Evidently Texas is simply too profitable a state to ignore, lawsuit or no lawsuit.
You might also remember BlackRock from such activities as being caught on camera saying they buy and sell politicians and dabbling in buying up residential real estate (a supergenius idea that lost a lot of companies a lot of money).
BlackRock et. al. should abandon ESG, stop tying their fortunes to fighting the boogeyman of “climate change,” get out of leftist politics entirely and narrow their focus to making money for their investors.
Tags: Anthropogenic Global Warming, BlackRock, coal, Environmental Social Governance (ESG), Jeremy Kernodle, Ken Paxton, Lawsuit, State Street, Texas, Vanguard
BlackRock doesn’t actually have trillions, they manage trillions, their own assets are quite limited. That’s a distinction to come once they get busted at trial.
“Manage” is a little strong for a lot of what they do since an awful lot of that money they’re ‘managing’ is in index funds; the whole point of an index fund is that a simple algorithm does the managing.
Specifically, if you have less than x% of the company’s shares, buy. Sell if you have more. Adjust x until you’ve spent all the money in the fund.
Which companies are in the basket is usually determinative, too, whether it’s every company on the NYSE or every electronics manufacturer on the NASDAQ.
The political problem is that BlackRock/Vanguard/State Street own (and therefore vote) those shares, despite buying them with other people’s money.
Oh, and turns out there’s another political-economic problem: these index funds own absurd amounts of every stock market; it seems likely if these companies have to be unwound that it would severely impact stock prices when something north of 20% of every publicly traded corporation suddenly needs to be sold.