“ESG firms invested in coal industry they tried to reduce, while reaping big profits, lawsuit alleges”, By Kevin Killough
“The lawsuit claims that those figures and others demonstrate that the publicly held coal companies weren’t responding to the laws of supply and demand, but to the pressures of ESG directors….”
ESG firms invested in coal industry they tried to reduce, while reaping big profits, lawsuit alleges
BlackRock, State Street and Vanguard had substantial investments in all publicly traded coal companies, and used that leverage to reduce production. Smaller producers couldn't increase output, in part due to banks' ESG policies. The three investment firms reaped huge profits.
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Published: December 2, 2024 11:01pm
Updated: December 3, 2024 8:38am
The State of Texas has been a leader in the pushback against environmental, social and governance (ESG) policies, passing some of the first anti-ESG laws in the country. Last week, Texas Attorney General Ken Paxton moved to protect the coal industry from what Paxton says is an effort on the part of large investment firms to not only shrink coal companies — but also unfairly profit from them.
Paxton teamed up with 10 other attorney generals in GOP states to file a lawsuit against BlackRock, State Street Corporation and Vanguard Group, three of the largest investors in the world. The lawsuit alleges that the three asset managers acquired substantial stockholdings in every significant publicly held coal producer in the United States. The defendants shared information, communicated with the management of the coal companies they invested in, and voted with their shares to artificially reduce production and constrain the supply of coal.
Smaller coal producers, according to the lawsuit, lacked the capacity and financial resources to raise production and sufficiently meet demand in order to capture a market share. Likewise, banks’ ESG policies made it difficult for these competitors to obtain financing to expand their operations.
“Defendants are directly restraining competition between the companies whose shares they have acquired, but their war on competition has consequences for the entire industry,” the lawsuit states.
File
Complaint, Doc. 1- States v. BlackRock.pdf
Nefarious effort
Vanguard didn’t respond to multiple requests for comment. BlackRock and State Street disputed the attorney generals’ claims.
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A spokesperson for BlackRock said that the firm has invested billions in the Texas energy industries, including coal, and it’s working with the state to attract investments to the state’s power grid, which will improve retirement investments. To claim BlackRock would invest money in companies with the goal of harming them, the spokesperson said, “defies common sense.”
A spokesperson for State Street called the lawsuit “baseless” and was looking forward to presenting its case in court. State Street, the spokesperson said, works in the long-term financial interests of its investors, and focuses on enhancing shareholder value. "As long-term capital providers, we have a mutual interest in the long-term success of our portfolio companies,” the State Street spokesperson said.
Travis Deti, executive director of the Wyoming Mining Association, told Just the News that, while he wasn’t familiar with Paxton’s complaint, he’s pleased that the attorney generals were standing up for the coal industry. Wyoming produces over 40% of the nation’s coal, and the industry is a key part of the state’s economy. The state’s coal producers will likely dip below 200 million tons produced this year, which will be the lowest since 2023, according to Cowboy State Daily.
“The whole ESG effort is nefarious, and of course, it’s had its impacts. We applaud the folks bringing the lawsuit, because it's really counterproductive. It certainly hurts the industry. When we're talking about energy, we should go to our most affordable and abundant resources to provide for the energy needs of this country. And this kind of ESG meddling doesn't serve that interest and doesn't serve the American people,” Deti said.
Immense influence
The three firms named in the suit had large stakes in Peabody Energy and Arch Resources, which together produce over 30% of the nation’s coal. BlackRock, State Street and Vanguard combined had a 30.43% stake in Peabody, and a 34.19% stake in Arch Resources. In the case of the other publicly traded coal companies, the three firms have at least a 25% stake in all but two.
“Defendants have immense influence over these companies on their own, but collectively Defendants possess a power to coerce management that is all but irresistible. Defendants have used that collective power — by proxy voting and otherwise — to pressure the major coal producers to reduce production of coal, and in particular production of the thermal coal used to generate the electricity that powers American homes and businesses,” the lawsuit claims. All combined, the three banks have at least $24.5 trillion under management.
The lawsuit also shows that between 2019 and 2022, as production rates declined, the companies saw profits soar. Peabody Energy had a production decline of 34.7% in those three years, but company profits rose 853.9%. Arch Resources production fell 9.4%, but profits increased 469.2%.
The lawsuit claims that those figures and others demonstrate that the publicly held coal companies weren’t responding to the laws of supply and demand, but to the pressures of ESG directors from the three firms.
“What happened next was economically predictable: Defendants’ acquisition of shares in the Coal Companies caused a substantial reduction in competition between those firms,” the lawsuit states.
Emily Arthun, CEO of the American Coal Council, told Just the News, that ESG policies that firms used to push anti-fossil fuel policies came down particularly hard on the coal industry, but for these firms to profit from an industry its shrinking is especially surprising.
“It’s hypocrisy at its best,” Arthun said.
Both ends
Energy expert Tom Shepstone wrote on his "Energy Security and Freedom" Substack that the alleged collusion between the three firms impacted consumers. “We all paid more for electricity produced by coal and then paid again as massive subsidies went into solar and wind, giving a whole new meaning to what burning the candle at both ends means and filling the pockets of the BSV Gang of Three [BlackRock, State Street, and Vanguard], our modern-day robber barons,” Shepstone wrote.
The industry has also faced federal pressure attacking both supply and demand. The EPA’s power plant rule that was finalized in April requires carbon capture on all existing and new coal plants, but the agency’s own modeling showed that these technologies wouldn’t be deployed on any new plants and only one existing one through 2055.
Just before the Thanksgiving holiday, the Bureau of Land Management announced officially it would end all coal leasing in the Powder River Basin. The region stretches across northeast Wyoming and part of Montana, and 43% of the nation’s coal comes from the area. “We’re seeing energy demand rise, and they’re working hard to shut down a very affordable, reliable energy source,” Arthun said.
During his campaign President-elect Donald Trump had little to say about coal, other than promising to roll back the EPA’s power plant rule. Arthun and Deti said they’re “cautiously optimistic” about how the industry will fare under the new administration.
“I think we’ll see a lot of collaboration between the industry and the incoming president and Congress,” Arthun said.
BlackRock - Larry Ratfink ESG funds were also invested in fossil but as a backstop. Buried in documents.