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Indiana has joined 10 other states in bringing a lawsuit against three of the world’s largest investment companies, with Indiana Attorney General Todd Rokita alleging the firms are illegally conspiring to manipulate energy markets.
The lawsuit was filed Nov. 27 in Texas’ Eastern District Court. It names Blackrock, State Street and Vanguard Group as defendants.
Rokita announced in a news release Thursday that his office is “taking further action to stop woke corporatists and their left-leaning allies in government from driving up energy costs for hardworking Hoosiers.”
“We’re taking on very powerful forces arrayed against the interests of everyday working Hoosiers,” Rokita said. “Coal has been the backbone of Indiana’s economic success for decades. The demand for electricity has gone up and these ESG titans are reaping the benefits of these skyrocketed prices; by keeping their thumb on production.”
Rokita claimed ESG investing — the acronym stands for the investing principle that prioritizes environmental issues, social issues, and certain corporate governance ideas — has elevated goals like mitigating climate change, enforcing hiring quotas, and achieving social justice benchmarks above the fiduciary duty to maximize returns for investors.
“BlackRock is deeply invested in Texas’ success. On behalf of our clients, we have billions invested in Texas energy, partnering with the state to attract investments into the Texas power grid and helping millions of Texans retire with dignity,” BlackRock spokesperson Alexander Williams said in an email to Indiana Lawyer. “BlackRock’s holdings in 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.”
He said 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, ” William said.
State Street also released a statement, saying it “acts in the long-term financial interests of investors with a focus on enhancing shareholder value. As long-term capital providers, we have a mutual interest in the long-term success of our portfolio companies. This lawsuit is baseless, and we look forward to presenting the facts through the legal process.”
Vanguard Group did not immediately respond to a request for comment.
Rokita alleged that, over the past four years that America’s coal producers “have not been responding to the price signals of the free market, but have been listening to BlackRock, Vanguard, and State Street instead as alleged in the complaint.”
“The three asset managers acquired substantial stockholdings over several years in every significant publicly held coal producer in the United States, thereby allegedly gaining the power to control the policies of coal production in the United States,” Rokita said.
The lawsuit alleges that, since 2021, the defendants had 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.” Those goals included reducing carbon emissions from coal by more than 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,” the lawsuit stated.
Indiana and the other plaintiffs claim the defendants’ holdings threaten to substantially reduce competition in violation of Section 7 of the Clayton Act, which prohibits any acquisition of stock where “the effect of such acquisition may be substantially to lessen competition.”
In August, the Indiana Capital Chronicle reported that Indiana Secretary of State Diego Morales sent a cease and desist letter to BlackRock — the world’s largest asset manager — for alleged securities fraud, accusing the company of making “false and misleading statements” about their ESG funds and allocation focus.
The company was accused by Morales of telling clients their financial prospects and outcomes would be better in the long run through ESG-backed funds. The secretary of state emphasized in his letter that there is “little to no evidence” to back that up, although Morales offered no evidence of his own to substantiate the allegations, according to the Capital Chronicle.
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