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States say firms began pressuring coal companies in 2021

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BlackRock ( BLK ) says suit is baseless, discourages investment

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Texas AG decries 'weaponization' of financial industry

(Adds State Street comments in paragraphs 7-8)

By Jonathan Stempel and Carolina Mandl

Nov 29 (Reuters) - BlackRock ( BLK ), Vanguard and State

Street have been sued by Texas and 10 other

Republican-led states, which said the large asset managers

violated antitrust law through climate activism that reduced

coal production and boosted energy prices.

Wednesday's complaint filed in the federal court in Tyler,

Texas, is among the highest-profile lawsuits targeting efforts

to promote environmental, social and governance goals, or ESG.

The defendants were accused of exploiting their market power

and involvement in climate advocacy groups to pressure coal

companies to slash output and reduce carbon emissions from coal

by more than 50% by 2030, driving up consumers' utility bills.

"Competitive markets -- not the dictates of far-flung asset

managers -- should determine the price Americans pay for

electricity," the states said in the complaint.

BlackRock ( BLK ), Vanguard and State Street together have more than

$26 trillion of assets under management.

In a statement, BlackRock ( BLK ) said any suggestion it invested in

coal producers to harm them was "baseless and defies common

sense. This lawsuit undermines Texas' pro-business reputation

and discourages investments in the companies consumers rely on."

State Street also said on Friday the lawsuit is "baseless"

and that it invests "with a focus on enhancing shareholder

value."

"We look forward to presenting the facts through the legal

process," the firm wrote in a statement.

Vanguard did not immediately respond to requests for

comment.

The 11 states also include Alabama, Arkansas, Indiana, Iowa,

Kansas, Missouri, Montana, Nebraska, West Virginia and Wyoming.

Republicans have long explored using U.S. antitrust laws to

target alleged collusion among investment managers to advance

climate-related goals.

Climate advocates, in contrast, view assessing environmental

risks as essential to determining what investments are worth.

BIG STAKES IN COAL COMPANIES

The states objected to BlackRock ( BLK ), Vanguard and State Street

allegedly pressuring coal companies for change starting in 2021.

They also criticized the defendants' membership in the Net

Zero Asset Managers Initiative, which says members are committed

to complying with all antitrust laws, and BlackRock's ( BLK ) and State

Street's membership in Climate Action 100+.

Vanguard left the Net Zero initiative in 2022, while

BlackRock ( BLK ) and State Street left Climate Action 100+ in February.

But the states said the withdrawals did not negate the

"ongoing and future threat" of continued pressure.

It cited the defendants' investments in nine coal companies,

including combined respective stakes of 34.2% and 30.4% in Arch

Resources ( ARCH ) and Peabody Energy ( BTU ), the largest

publicly traded U.S. coal producers.

BlackRock ( BLK ) was also accused in the lawsuit of "actively

deceiving" investors about its non-ESG funds by promising to

dedicate them to enhance shareholder value, when it allegedly

used all its holdings to advance its climate goals.

Texas Attorney General Ken Paxton, whose office filed the

lawsuit, in a statement accused the defendants of promoting an

"illegal weaponization of the financial industry in service of a

destructive, politicized 'environmental' agenda."

The lawsuit seeks to block the defendants from using their

investments to vote on shareholder resolutions and take other

steps that could undermine coal output and limit market

competition.

It also seeks civil fines for violating federal antitrust

and Texas consumer protection laws.

The case is Texas et al v BlackRock Inc ( BLK ) et al, U.S. District

Court, Eastern District of Texas, No. 24-00437.