World’s Largest Investment Management Co. Sued by Attorney General for Energy Price Fixing

Texas Attorney General Ken Paxton is suing three investing companies, accusing them of market manipulation. He claims the companies are guilty of acquiring substantial stockholdings in U.S. coal producers and then weaponizing their shares to pressure the coal companies with "green energy" goals, goals which included reducing coal output by more than half by 2030.

Paxton has had 10 other states join his suit, all claiming the money managers, as part of their green agenda, combined their market clout and membership in climate groups to pressure coal producers to cut output. Consequent shortages have caused Texans and residents of the other states to pay higher power bills according to the lawsuit, filed recently in federal court in Texas. “Competitive markets — not the dictates of far-flung asset managers — should determine the price Americans pay for electricity,” the AG wrote in the complaint. Some states, including Red states in Montana and West Virginia, are asking the court to bar the three largest US investment firms from using their stock in coal companies to vote on shareholder resolutions or otherwise attempt to restrain output and limit market competition.

It seems these three companies were large enough and had enough combined power to essentially make the coal industry their own little OPEC. The lawsuit alleges that they were “deliberately and artificially constricting supply, causing increased prices and enabling the Defendants to produce “extraordinary revenue gains.” Federal law prevents such oligopolies (a small group artificially influencing the market due to their combined power).

“Texas will not tolerate the illegal weaponization of the financial industry in service of a destructive, politicized ‘environmental’ agenda. BlackRock, Vanguard and State Street formed a cartel to rig the coal market, artificially reduce the energy supply, and raise prices,” said Attorney General Paxton. “Their conspiracy has harmed American energy production and hurt consumers. This is a stunning violation of State and federal law.”

About The Accused….
All three are what is referred to as bank holding companies. A bank holding company is a company that controls one or more banks but is not actively engaged in banking itself. The term bancorp or Bancorporation has arisen as a way to refer to them. In the United States, a bank holding company, as provided by the Bank Holding Company Act of 1956 (12 U.S.C. § 1841 is broadly defined as "any company that has control over a bank". All bank holding companies in the US are required to register with the Board of Governors of the Federal Reserve System.

About BlackRock….

BlackRock is the manager of the iShares of exchange-traded funds. Along with The Vanguard Group and State Street, it is considered among the Big Three in exchange-traded fund managers. As of 2023, BlackRock was ranked 229th on the Fortune 500 list of the largest United States corporations by revenue. BlackRock is the world's largest asset manager with US$11.5 trillion in assets under their management as of 2024. Headquartered in New York City, BlackRock has 70 offices in 30 countries, and clients in 100 countries.

BlackRock has a record of plotting against the energy industry, forcing disinvestment in some cases. They have what they describe as ESG focus, proudly exposing how they have been “actively involved in incorporating environmental, social, and governance (ESG) factors into its investment strategies.” They have been a thorn in the industry’s side for years now.
Key aspects of BlackRock, as per their corporate reports, include the usual fiduciary duties such as proper and appropriate asset management. They have a global presence, with offices and operations worldwide. They claim to be a “leader in financial technology, developing and deploying innovative solutions for its clients”. All fine and dandy for any publicly-traded corporation. Where they differ, and where they cross the line, in my opinion, is through what they call their ESG focus. Through this, they actively try to control the investments in their portfolios demanding less and less fossil fuels as a part thereof.

BlackRock has intentionally positioned itself as an industry leader in environmental, social and governance (ESG) considerations in investments. The states of West Virginia, Florida and Louisiana have divested money away from or refuse to do business with the firm because of its ESG policies. BlackRock has been criticizing companies that are involved in the arms industry, China (human rights violations), and the People’s Liberation Army, but have been especially hostile to fossil fuels.

The Vanguard Group, Inc.

The Vanguard Group, Inc. is an American registered investment advisor founded on May 1, 1975, and based in Malvern, Pennsylvania. They control about $9.3 trillion in global assets as of May 2024. As the largest provider of mutual funds

and the second-largest provider of exchange-traded funds (ETFs) in the world after BlackRock's iShares, Vanguard also offers brokerage services, educational account services, financial planning, asset management, and trust services. Several mutual funds managed by Vanguard are ranked at the top of the list of US mutual funds by assets under management. Along with BlackRock and State Street, Vanguard is considered to be one of the Big Three index fund managers that play a dominant role in corporate America.

Vanguard has generally been labeled as having a “somewhat passive approach to climate change”. They certainly do not have the same enthusiasm in combating the industry as BlackRock. However, Vanguard also acknowledges climate change and has made commitments to address such, including making a pledge to stockholders that it would achieve zero emissions across their entire portfolio by 2050. However, this suit is not about any of these companies individually or collectively breaking any laws regarding their investment strategies. Rather, it is a price-fixing scheme, as described above, which allowed all three to allegedly profit unlawfully through market control and manipulation of the coal industry.

About State Street….

As for State Street, they engage in the same services as Vanguard and BlackRock, and have a complicated history regarding fossil fuels. They have been referred to as an “enemy” to the industry by some while others would characterize them as just “supporting a transition to cleaner energy”. Again, their track record is unimportant. What is important is whether they did or did not collude with the other Big Two to fix prices and profit at the expense of typical energy consumers here in America. And, while all three are huge and powerful corporations, the emphasis here is on the crime itself, not the accused. The focus becomes fixed more upon BlackRock because of their immense size and power to control markets, whether by legal means of not. Court results will either find them all three equally guilty or not-guilty, depending on the evidence and the tone of the judicial proceedings themselves.

Their Response?

All three were pressed for a statement, but BlackRock was the only one to respond saying, "The suggestion that BlackRock has invested money in companies with the goal of harming those companies is baseless and defies common sense. This lawsuit undermines Texas' pro-business reputation and discourages investments in the companies consumers rely on." BlackRock said its holdings’ energy companies are regularly reviewed by federal and state regulators. “We make these investments on behalf of our clients, and our focus is on delivering them financial returns,” the company said. Vanguard declined to comment, while State Street has chosen to keep a low profile regarding comments on the matter.

This action marks the culmination of a years-long investigation by GOP officials, officials determined to combat Wall Street’s efforts to address climate change via coercion. They proudly claim to be “the main pillar of the environmental, social and governance movement”. These investment firms had already been warned last year by a number of state AG’s who cautioned against using Americans’ savings to “push political goals” during shareholder voting. In response, climate advocates have said environmental risks are financial risks and that addressing them is among investors’ fiduciary responsibilities.

“Texas won’t tolerate the illegal weaponization of the financial industry in service of a destructive, politicized ‘environmental’ agenda,” Paxton said in a statement on Wednesday.

The case is being handled by the Buzbee Law Firm and Cooper & Kirk as outside counsel. Let’s see how this one shakes out.