Texas Judge Allows Climate Antitrust Case to Proceed

In a significant legal development, a U.S. federal judge has ruled that a multistate antitrust lawsuit filed against BlackRock, Vanguard, and State Street can move forward, denying the asset managers’ motions to dismiss most of the claims. The lawsuit, spearheaded by Texas Attorney General Ken Paxton and backed by 10 other Republican-led states, accuses the three financial giants of violating antitrust laws by using their influence over energy companies to manipulate coal markets through coordinated climate-focused investment strategies.

At the core of the lawsuit is the allegation that these asset managers—among the largest in the world—acquired substantial shareholdings in major U.S. coal producers and then used their combined power to pressure those companies into cutting coal production. The plaintiffs argue that these efforts were not based on free-market decisions but were instead part of a coordinated strategy to advance environmental, social, and governance (ESG) goals at the expense of U.S. consumers, who ultimately bore the cost of higher energy prices.

According to the lawsuit, the firms allegedly acted in concert through their involvement in climate-focused coalitions, such as the Net Zero Asset Managers Initiative (NZAM) and Climate Action 100+, both of which require members to actively engage with portfolio companies to align their business strategies with global climate goals. The states claim that these initiatives functioned as platforms for collusion, through which the asset managers formed what they described as an “investment cartel” to collectively reduce coal output, thus breaching the Clayton Act—a federal law designed to prevent anticompetitive mergers and practices.

In their defense, the asset managers maintained that they acted as passive investors, meaning their stock acquisitions alone cannot constitute grounds for antitrust liability. They further argued that the states failed to provide direct evidence of any conspiracy or agreement intended to harm competition. However, U.S. District Judge Jeremy Kernodle rejected these arguments for the most part, ruling that the lawsuit includes “dozens of specific examples” suggesting a coordinated effort among the asset managers. He noted that while there is no direct evidence of an explicit agreement, the plaintiffs have provided sufficient circumstantial evidence to allow the case to proceed to the discovery phase.

Judge Kernodle pointed to public commitments made by the asset managers within the climate coalitions as a key element of the plaintiffs’ case. He acknowledged that while it remains to be proven whether these firms actually succeeded in influencing coal production or caused anticompetitive harm, the presented evidence was enough to merit further legal examination. He wrote that the states’ claims are “not vague and conclusory” and added that “Plaintiffs 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.”

Still, the judge also issued a cautionary note, acknowledging the lack of direct evidence and calling the case a “close call” in legal terms. The ruling left room for the possibility that the plaintiffs may ultimately fail to substantiate their claims during trial.

The lawsuit has received support from federal authorities, with the U.S. Department of Justice and Federal Trade Commission issuing statements earlier this year backing the legal effort. The Trump administration has framed the case as part of a broader initiative to combat what it describes as ideologically driven ESG strategies that, in its view, compromise economic growth and energy independence.

Attorney General Paxton hailed the judge’s ruling as a “major victory” and a crucial step toward holding the asset managers accountable. “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,” he stated.

The asset managers responded swiftly to the ruling. Vanguard said it was “disappointed in the court’s decision” and vowed to “vigorously defend against plaintiffs’ claims.” State Street reiterated that the case “remains baseless and without merit,” while BlackRock labeled the lawsuit “absurd,” arguing it rests on the false notion that shareholders would conspire to diminish the value of their own investments by intentionally reducing coal production.

BlackRock also criticized the political underpinnings of the lawsuit, warning that the pressure to divest from ESG goals undermines the Trump administration’s stated ambition of achieving American energy independence. It claimed that forced divestment would curtail coal companies’ access to capital, limit investment, destroy jobs, and ultimately raise energy prices for American consumers.

Though the outcome of the case remains uncertain, the decision to let it proceed signals a potential turning point in the growing political and legal backlash against ESG investing. It also raises significant questions about the future role of institutional investors in steering corporate strategy on