Texas and several other US states have sued investment titans BlackRock Inc (NYSE:BLK), State Street Corp (NYSE:STT) and Vanguard Group for conspiring to artificially constrict the coal market.
Ken Paxton, the Texas attorney general said the state "will not tolerate the illegal weaponization of the financial industry in service of a destructive, politicized ‘environmental’ agenda".
He said that by building up large shareholdings in all publicly held US coal producers, BlackRock, Vanguard and State Street "formed a cartel to rig the coal market", calling it a "stunning violation of State and federal law".
The collective ownership stake in the largest coal producers, Peabody Energy Corporation (NYSE:BTU) and Arch Resources Inc (NYSE:ARCH), was 30.43% and 34.19%, with large stakes also accumulated in NACCO Industries, CONSOL Energy, Alpha Metallurgical Resources, Vistra Energy and more.
The Texas AG, who was joined on the lawsuit by counterparts from the states of Alabama, Arkansas, Indiana, Iowa, Kansas, Missouri, Montana, Nebraska, West Virginia anbd Wyoming, said the trio used their shareholder influence to pressure the coal companies to accommodate green goals, pushing to reduce coal output by more than half by 2030, which he argues led to both a reduction in the energy supply and higher prices.
BlackRock said that the suggestion that it has "invested money in companies with the goal of harming those companies is baseless and defies common sense".
"This lawsuit undermines Texas’s pro-business reputation and discourages investments in the companies consumers rely on."
BlackRock boss Larry Fink made a pledge to divest itself of coal holdings in January 2020 and in January 2021, Fink said the company had completely divested all companies with more than a quarter of thermal coal revenues from active investment strategies.
What's more, the company, whose major holdings also have also included oil producers such as BP, Shell and ExxonMobil, was regularly accused of hypocrisy by environmental campaigners as it routinely voted against shareholder motions directing boards to take action on the climate crisis.
However, the Texas filing states that in 2021, the three defendants each publicly announced their commitment to use their shares to pressure the management of all the portfolio companies in which they held assets to align with net zero goals, including reducing carbon emissions from coal by over 50%.
"Rather than individually wield their shareholdings to reduce coal output, therefore, defendants effectively formed a syndicate and agreed to use their collective holdings of publicly traded coal companies to induce industry-wide output reductions."
Coal production is widely seen as one of the dirtiest ways of generating power, and the Intergovernmental Panel on Climate Change has called for coal use for electricity to fall 88% between 2020 and 2030 to limit the speed of global warming.