Securities Regulation Daily Wrap Up, INVESTMENT COMPANIES—Vanguard agrees to $29.5 million settlement over coal industry ESG antitrust claims, (Feb 27, 2026)
Organizations Mentioned:Vanguard Group, Inc.
By Brian Craig, J.D.
The settlement agreement resolves allegations against Vanguard over market manipulation in the coal industry, but the claims against BlackRock and State Street remain.
Vanguard Group, Inc. (Vanguard) has entered into a $29.5 million settlement agreement with several states to resolve claims in the federal district court in Tyler, Texas that the institutional investment company engaged in anticompetitive conduct in the environmental, social, and governance (ESG) approach to investing in the coal industry. As announced by Texas Attorney General Ken Paxton, Vanguard has agreed to pay $29.5 million to 13 different states and to make certain changes with influence by Vanguard’s portfolio companies in the market and expand proxy voting. While the case resolves the claims brought against Vanguard, claims against asset managers BlackRock, Inc. (BlackRock) and State Street Corp. (State Street) remain (State of Texas v. BlackRock, Inc., No. 6:24-cv-00437-JDK (E.D. Tex. Feb. 25, 2026)).
Background. In 2015, the Attorney General for 13 states filed an antitrust suit in the federal district court in Texas alleging that defendant institutional investors BlackRock, State Street, and Vanguard exercised their influence as major shareholders of competing coal companies to push a reduction of coal output industrywide. These actions, along with the unlawful sharing of competitively sensitive information and other allegations, increased coal prices and forced American consumers to pay more for energy as part of an unlawful left-wing ideological scheme. The complaint alleges violations of the Clayton Act and Sherman Act by the institutional investors to drive up the price of coal and electricity prices under the guise of “green energy” and the ESG approach.
The states joining Texas in the action include Alabama, Arkansas, Indiana, Iowa, Kansas, Missouri, Montana, Nebraska, Louisiana, Oklahoma, West Virginia, and Wyoming. The FTC and the Justice Department’s Antitrust Division jointly filed a Statement of Interest in the action. The Statement of Interest argued that the asset manager defendants had made multiple errors of law in their arguments to the court regarding the application of the nation’s federal antitrust laws to the actions of institutional shareholders in their role as common owners.
On August 1, 2025, the court denied a motion to dismiss filed by the investment companies and allowed the case to proceed to discovery. In denying the motion to dismiss, the court noted that the Clayton Act safe harbor would not apply to shareholders if they tried to reduce competition.
Settlement terms. The terms of the settlement agreement include a payout by Vanguard of $29.5 million to the states that joined the action. Vanguard will place the settlement funds in an escrow account within 30 days of dismissal of the action to then be distributed to the states. In addition, Vanguard has committed to avoid imposing ESG goals over its customers’ profitability. Vanguard agreed not to use its shareholdings to (a) direct its portfolio companies’ business strategies, (b) threaten its portfolio companies that it will withdraw from its holdings unless they agree to act (or not act) in some manner, or (c) nominate directors or shareholder proposals to its portfolio companies. In addition, Vanguard agreed to offer proxy voting to investors in funds accounting for at least 50 percent of assets invested in U.S. equity funds it advises. This will ensure that Vanguard’s customers can make their voices known on portfolio companies’ business, including whether companies should maximize profitability over ESG or other goals.
Furthermore, Vanguard and its U.S.-domiciled subsidiaries agreed to withdraw from the Principles for Responsible Investment (PRI), a United Nations-supported, international network of over 5,000 financial institutions committed to ESG factors into investment decisions. Vanguard also consented not participate in any other organization that advocates for the setting of specific output or emissions targets or levels or that requires its members to make commitments specific to achieving climate-focused investment or stewardship objectives such as NZAM, Ceres, or Climate Action 100+. Along with the settlement payout and changes in how Vanguard can influence the market, Vanguard agreed to provide discovery materials relating to the action from 2020 to 2024.
Attorney General’s comments. “I am glad to see that Vanguard has chosen to protect investors and become the industry leader when it comes to empowering investors with proxy voting choice. This sets a new standard for institutional investors that every company should follow,” said Texas Attorney General Paxton. “While Vanguard has taken appropriate action to resolve this case, Blackrock and State Street have continued to ignore state laws, engage in anticompetitive schemes that hurt American energy, and undermine those who use their services to invest. 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.”
Companies: Vanguard Group, Inc.
LitigationEnforcement: Enforcement InvestmentCompanies