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BlackRock on Monday called on US judges to dismiss lawsuits by Texas and other Republican-led states, calling it an “unprecedented” case that conspired to curb coal production and overturned the way the financial industry approaches corporate governance.
Attorneys for BlackRock and other property managers argued in Texas court that there was no evidence of trying to limit coal production or work together to reduce carbon emissions.
“The antitrust claims in this case are unprecedented, they are unhealthy and unsupported,” Greg Costa, attorney for Gibson Dunn, who represents BlackRock, told Judge Jeremy Carnordle. “There is no flesh in the bones of this complaint.”
Texas and ten other US countries filed lawsuits last year against three of the nation’s largest index fund managers, BlackRock, State Street and Vanguard, accusing them of using large holdings of passive index funds to promote net zero carbon emissions policies through proxy voting and other forms of impact. They claim that in turn it put pressure on coal companies to cut production and increase energy prices.
This case is limited to coal production, but could have a broader impact on the investment world. A state victory can dramatically reshape how passive funds interact with businesses, vote at their annual representative meetings and join industry groups such as the U.S. Chamber of Commerce.
Conservative activists are actively targeting the judiciary in their efforts to change the laws governing America’s legal landscape and business and consumer behavior. In this case, if the state is successful, it could promote further litigation in a wider range of industries.
Kernodle did not issue a sentence Monday. If the case is not rejected, BlackRock and other asset managers will need to take over internal communications and other evidence that can shed light on how the issue is handled.
All three asset managers have signed environmental commitments such as the Net Zero Asset Managers Initiative, an industry group that supports greenhouse gas emissions. The initiative was suspended in January after a wave of exits from corporate participants, including BlackRock.
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Brian Burns, Cooper & Kirk’s attorney representing the state, said these environmental commitments had an impact on the way that asset managers ultimately voted and rebuilt into the broader coal industry.
Vanguard “had a declared policy that essentially utilizes stocks and tries to work with the Paris Agreement to set goals,” Burns said. “It’s a clear use of stocks. You don’t have to vote for stocks to use them.”
In a statement, Vanguard said: “This complaint falls far short of legal standards to succeed. We strongly defend our ability to continue to provide investors with the best chance of investing success.”
