Without Patrick’s & Hegar's leadership, ESG would still reign supreme across the U.S.
AUSTIN, Texas (Texas Insider Report) — In late November Texas Attorney General Ken Paxton, joined by ten other state Attorneys General, sued asset managers Vanguard, BlackRock, and State Street alleging that the firms conspired to artificially constrict the coal market through anticompetitive trade practices. Paxton, who is running to unseat Republican Senator John Cornyn in Congress, argued that the companies conspired to manipulate energy markets, driving up costs for consumers.
Now, President Trump’s Federal Trade Commission (FTC) and Department of Justice (DOJ) have filed a Statement of Interest in the multi-state case.
While most American’s support President Trump’s common sense public declaration of the importance of maintaining an all of the above approach to our energy needs, the unfortunate issue is that this suit ignores the realities facing the coal market faces.Over the last two decades, thermal coal production in the U.S. has declined – significantly.
According to the Energy Information Administration (EIA), the U.S produced 1.1 trillion short tons of coal in 2001, but by 2020, that number declined by nearly half to 535 billion short tons. The EIA forecasts coal production will continue to decline over the next two years because of coal’s “continued competition with natural gas and renewables in the electric power sector.”
While energy production from renewables has risen in recent years – especially as the Biden White attempted to phase out multiple fossil fuel sectors and threw subsidies around to support wind and solar – the reality is that the rise of natural gas in the U.S. over the last two decades is the major driver of coal’s demise, not a cabal of financial firms determined somehow to make less money.
But a concerning outcome of Paxton’s lawsuit, should it succeed, would be to force these institutional investors to actually sell their holdings in coal to the tune of billions of dollars.
Considering this a "win" from a conservative led anti-ESG Environmental, Social & Governance suit sounds more like the goals of left-wing Democrats in Oregon or New York – not from the Attorney General of a state built upon fossil fuels and running to represent Texas’ values in the U.S. Senate.
As the Wall Street Journal Editorial Board recently said, the claim that money managers bought shares in coal companies so that those companies would produce less coal, thereby hurting their bottom line, and investors’ returns, is a strange one.
Considering this a "win" from a conservative led anti-ESG Environmental, Social & Governance suit sounds more like the goals of left-wing Democrats in Oregon or New York – not from the Attorney General of a state built upon fossil fuels and running to represent Texas’ values in the U.S. Senate.
As the Wall Street Journal Editorial Board recently said, the claim that money managers bought shares in coal companies so that those companies would produce less coal, thereby hurting their bottom line, and investors’ returns, is a strange one.
The idea that investment firms would increase their exposure to an industry – buying more shares of coal companies – to leverage their power so that the same companies would decrease the operations that make them money in the first place flies in the face of sound investment practices.
Putting coal out of business would have harmed both their clients – and their own holdings and returns.
Paxton’s suit stands in stark contrast to other Texan leadership.
For example, the suit points to asset managers’ involvement in Climate Action 100+ and the Net Zero Asset Managers Initiative (NZAMI) as examples of collusion to reduce coal output.
As the Wall Street Journal, notes, the companies “did make fuzzy climate ‘commitments’ that let them virtue signal, but that didn’t seem to affect their investments.”
The firms named in the suit, however, have all quit the two climate coalitions, and as we have noted repeatedly, that is due to Texas’ leadership – specifically Comptroller Glenn Hegar, Lt. Governor Dan Patrick, and the Texas State Legislature.
Paxton’s suit stands in stark contrast to other Texan leadership.For example, the suit points to asset managers’ involvement in Climate Action 100+ and the Net Zero Asset Managers Initiative (NZAMI) as examples of collusion to reduce coal output.
As the Wall Street Journal, notes, the companies “did make fuzzy climate ‘commitments’ that let them virtue signal, but that didn’t seem to affect their investments.”
The firms named in the suit, however, have all quit the two climate coalitions, and as we have noted repeatedly, that is due to Texas’ leadership – specifically Comptroller Glenn Hegar, Lt. Governor Dan Patrick, and the Texas State Legislature.
Without Hegar and the Lt. Gov’s leadership, Environmental, Social & Governance (ESG) would still reign supreme across the country. Instead, these firms have significantly decreased their commitment to ESG ideology, left the coercive climate coalitions, and invested in Texas.
Comptroller Hegar’s strong leadership has actually brought more investment into Texas, as opposed to forcing institutional investors to sell their holdings, impacting the state’s industries.
When Texas Senate Bill 13 was passed a few years ago, Hegar and the legislature put ESG on notice and barred companies like BlackRock from entering into contracts with the state. Since then, BlackRock has recommitted to investing in Texas’ oil and gas sector, illustrated by the firm’s joint venture with Occidental Petroleum, and is helping to launch the Texas Stock Exchange.
As BlackRock’s allegiance to ESG has slipped – the firm supported its fewest environmental and social shareholder proposals in years – Hegar reexamined the boycott list and removed them after careful consideration and analysis.
While Paxton looks to score political points and potentially damage a nationwide industry with his lawsuit, Hegar’s method exemplifies a meticulous and thorough approach to the underlying issue of ESG.
President Trump’s ‘Unleash American Energy’ agenda is the correct one – but this lawsuit would deliver unintended consequences setting back that national goal.
President Trump’s ‘Unleash American Energy’ agenda is the correct one – but this lawsuit would deliver unintended consequences setting back that national goal.
It is one thing for Texas to hold Wall Street accountable, bringing them back to the table with commonsense corrections, such as decreased support for ESG shareholder proposals; It is quite another thing for Texas to take up political crusades affecting not just our own constituents, but a nationwide industry.
