DON’T MESS WITH TEXAS: Vanguard reaches settlement with Texas in key case on ESG investing.
Vanguard has reached a settlement with Texas and other Republican-led states that accused the asset manager and its biggest competitors of conspiring to suppress coal production in a key case about environmental, social and governance investing.
The asset manager will pay $29.5mn to settle the litigation, leaving BlackRock and State Street to fend off the case alone. Vanguard, which manages $12tn in assets, did not admit wrongdoing.
Texas and several other states sued the three companies in 2024, accusing them of using the vast influence they derive from managing passive funds to push for net zero carbon emissions.
The states argued the three biggest US index fund managers did this through proxy votes and other forms of influence, which in turn pressed coal companies to cut production, pushing energy prices higher.
Meanwhile, the asset managers have argued in court that there is no evidence they directly sought to limit coal output or worked together to push companies to reduce their carbon emissions.
Vanguard decided to settle the litigation to avoid the potential for tens of millions of dollars in legal fees and to get rid of the “distraction”, said people familiar with the matter. BlackRock and State Street have not reached a settlement and the litigation continues.
“We’ve reached a resolution to put this matter behind us,” Vanguard said, adding that it “reaffirms our longstanding practices and standards and the passive nature of our index funds”.
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“This sets a new standard for institutional investors that every company should follow,” said Ken Paxton, attorney-general of Texas.
Coal is “an essential industry to support America’s ever-growing energy demands, and my office will continue to uproot and destroy any attempt by investment giants to push a woke agenda that puts American energy at risk”, he added.
Paxton’s statement comes as the White House has tried to revive the fortunes of coal as a vital part of the country’s energy mix.
Well, good. Let’s see how things turn out in Cuba before going Net Zero in the US: Cuba Becomes The First Country To Reach Net Zero. Shouldn’t We Be Celebrating?