Stay informed with free updates
Simply sign up to the Financial services myFT Digest — delivered directly to your inbox.
BlackRock asked a US judge on Monday to dismiss a lawsuit by Texas and other Republican-led states claiming asset managers conspired to suppress coal production, calling it an “unprecedented” case that could upend how the finance industry approaches corporate governance.
Lawyers for BlackRock and other asset managers argued in a Texas courtroom that there was no evidence they directly sought to limit coal output or work together to advance policies to reduce carbon emissions.
“The antitrust claims in this case are unprecedented, they’re unsound and they’re unsupported,” Gregg Costa, a lawyer from Gibson Dunn representing BlackRock, told Judge Jeremy Kernodle. “There’s just no meat on the bones of this complaint.”
Texas and 10 other US states filed a lawsuit last year against BlackRock, State Street and Vanguard, the three largest US index fund managers, accusing them of using their large holdings of publicly traded companies in passive index funds to push net zero carbon emissions policies through proxy votes and other forms of influence. That, in turn, pressured coal companies to slash production, driving energy prices higher, they claim.
Though the case is limited to coal production, it could have broader implications for the investment world. A victory by the states could dramatically reshape how passive funds interact with companies, vote in annual proxy meetings and participate in industry groups such as the US Chamber of Commerce.
Conservative activists have aggressively targeted the judiciary as they look to alter the American legal landscape and the laws governing business and consumer behaviour. If the states are successful in this case, it could spur further litigation in a broader range of industries.
Kernodle did not issue a ruling on Monday. If the case is not dismissed, BlackRock and the other asset managers would likely have to begin turning over internal communications and other evidence that could shed light on how they handled the issue.
All three asset managers signed on to environmental commitments such as the Net Zero Asset Managers Initiative, an industry group that supports cutting greenhouse gas emissions. The initiative was suspended in January after a wave of exits from corporate participants, including BlackRock.
Brian Barnes, an attorney for Cooper & Kirk representing the states, said those environmental commitments influenced the way the asset managers ultimately voted and reshaped the broader coal industry.
Vanguard “had a declared policy of basically leveraging their shares to try to push ‘carbon-intensive’ industries to set targets in alignment with the Paris Agreement”, Barnes said. “That’s a clear use of stock. You don’t have to vote your shares in order to use your shares.”
In a statement, Vanguard said: “This complaint falls well short of legal standards to be successful. We will vigorously defend our ability to continue to give investors the best chance for investment success.”
