Trump backs challenge to investment firms' climate goals

(CN) — The Trump administration filed a statement of interest Thursday in support of a lawsuit by conservative states challenging major investment firms’ participation in climate initiatives.

A coalition of 11 Republican attorneys general led by Texas Attorney General Ken Paxton filed an antitrust lawsuit in November against BlackRock Inc., State Street Corporation and The Vanguard Group — known as the “Big Three” asset managers — accusing the firms of engaging in anticompetitive schemes to pressure coal companies they own stock in to lower output.

The lawsuit takes issue with the investment companies’ participation in groups like Climate Action 100+ and the Net Zero Asset Managers initiative, which call on investors to use their investment power to help lower greenhouse gas emissions. The investment firms have since motioned to dismiss the lawsuit.

“This case spins a farfetched theory: three asset managers conspired (without speaking with each other) to decrease coal output (which increased) by controlling the production decisions of coal companies (in which they each never held more than small minority stakes),” the firms wrote in a motion to dismiss filed in March. “To find that Plaintiffs have stated an antitrust claim on these alleged facts requires contorting the law in a way that would hurt both coal companies and individual investors. The Court should reject this adventurous attempt to rewrite antitrust law.”

In their statement of interest, the Department of Justice and the Federal Trade Commission push back against the firms’ arguments for dismissal. They challenge the asset managers’ claims that they were merely engaging in lawful passive investment, as the lawsuit has accused the investment companies coordinating efforts to use their stockholdings to influence business decisions in ways that reduced competition.

“This case is not about ordinary activity by asset managers such as passive index investing or even procompetitive activism,” the agencies write. “As alleged, the holders of large quantities of stock in competing companies agreed to use those shareholdings to reduce the output of U.S. coal to increase profits at the expense of American consumers and businesses.”

The agencies point to executive orders President Donald Trump has signed in his second term seeking to boost domestic energy production, especially coal.

“Coal is vital to America’s energy security and provides a reliable, cost-effective source of energy to support growing electrical demand for artificial intelligence and a resurgence in domestic manufacturing,” the agencies write. “Competition in coal markets incentivizes companies to produce as much coal as the market demands. Allowing the marketplace to freely determine the intersection of supply and demand is thus critical to America’s energy security and economic dynamism.”

A spokesperson for State Street said in a statement to Courthouse News Service that the firm “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,” the spokesperson said. “This lawsuit is baseless, and we look forward to presenting the facts through the legal process. Additional filings do not change our assessment.”

A spokesperson for Vanguard told Courthouse News Service in a statement that the Trump administration’s arguments actually vindicate the company.

“Though we have concerns with many of the legal interpretations promoted by the agencies, Vanguard appreciates their explicit acknowledgement that the antitrust laws allow these three things: ‘passive fund investing,’ ‘shareholder advocacy for better corporate governance’ and ‘active investing that doesn’t harm competition,’” the spokesperson said. “The facts show Vanguard has stayed well within this construct.”

BlackRock did not immediately respond to a request for comment.

Texas Attorney General Ken Paxton issued a statement celebrating the Trump administration’s filing.

“I am grateful that the Trump administration has joined my effort to hold major asset managers accountable for weaponizing the financial industry to illegally control the energy markets and force a destructive ‘green energy’ ideology on the American people,” Paxton said. “The joint conspiracy by BlackRock, State Street, and Vanguard sought to undermine America’s energy independence at the expense of consumers and our national sovereignty. Together, President Donald Trump and I will hold these corporations accountable.”

Trump stirred controversy earlier this year when he fired two Democratic FTC commissioners, leaving the agency with just three Republican commissioners. The two removed commissioners have sued Trump over the firings, arguing they violate U.S. Supreme Court precedent that heads of independent agencies cannot be removed without cause.