The Vanguard Group, Inc. has agreed to pay $29.5 million and adopt significant operational restrictions to settle a multi-state antitrust lawsuit led by Texas Attorney General Ken Paxton, who called the settlement “one of the most significant enforcement actions ever taken against coordinated ESG-driven market manipulation.”
Background
In 2024, Paxton and 10 other Republican state attorneys general filed suit against Vanguard, BlackRock, and State Street, alleging that the asset managers conspired to use their significant shareholdings in major U.S. coal producers to coerce the companies into reducing coal production to advance climate-related investment goals. The plaintiffs alleged this conduct resulted in higher energy costs for American consumers.
The lawsuit alleged violations of the Clayton Act, which prohibits the acquisition of shares where the effect may substantially lessen competition. According to the complaint, the firms “effectively formed a syndicate and agreed to use their collective holdings of publicly traded coal companies to induce industry-wide output reductions” by participating in initiatives such as the Net Zero Asset Managers Initiative and Climate Action 100+.
In May 2025, the U.S. Department of Justice and Federal Trade Commission filed a joint statement of interest supporting the lawsuit.
Key Settlement Terms
Under the settlement, Vanguard agreed to the following commitments:
Passivity Commitments: Vanguard agreed not to advocate to any portfolio company that it take any particular course of conduct to reduce carbon emissions. Vanguard will not use its shareholdings to direct portfolio companies’ business strategies, threaten to withdraw from holdings unless companies agree to act or refrain from acting in a particular manner, or nominate directors or shareholder proposals to portfolio companies.
Withdrawal from ESG Initiatives: Vanguard agreed to withdraw from the UN-backed Principles for Responsible Investment (PRI), although the asset manager had already announced in November 2025 that it would remove its U.S. business from the PRI.
Proxy Voting Choice: Vanguard will offer proxy voting to investors in funds accounting for at least 50% of assets invested in U.S. equity funds it advises. This measure is intended to enable investors to make their voices known on portfolio company business decisions, including whether companies should prioritize profitability over ESG goals.
Monetary Payment: Vanguard agreed to pay $29.5 million to the plaintiff states.
Vanguard did not admit to any wrongdoing, and the settlement specified that it was being made “solely for the purpose of avoiding the burden and expense of litigation.”
Implications
Paxton characterized the settlement as setting “a new standard for institutional investors that every company should follow.” BlackRock and State Street have not announced settlements in the case and remain defendants in the ongoing litigation. Both firms have previously characterized the lawsuit as “baseless” and criticized its novel antitrust theory.
This settlement signals continued and intensifying legal and regulatory scrutiny of ESG-related investment practices.
[View source.]
