BlackRock, other fund managers lose bid to dismiss Texas climate collusion lawsuit

By Jody Godoy

Aug 1 (Reuters) - A U.S. judge on Friday largely rejected a request by top asset managers including BlackRock BLK.N to dismiss a lawsuit filed by Texas and 12 other Republican-led states that said the companies violated antitrust law through climate activism that reduced coal production and boosted energy prices.

U.S. District Judge Jeremy Kernodle in Tyler, Texas agreed to dismiss just three of the 21 counts in the states' lawsuit, which also names institutional investors State Street STT.N and Vanguard.

The lawsuit is among the highest-profile cases targeting efforts to promote environmental, social and governance goals.

Texas Attorney General Ken Paxton said the three companies "created an investment cartel to illegally control national energy markets and squeeze more money out of hardworking Americans,” and that “today’s victory represents a major step in holding them accountable."

The three asset managers said they would continue to defend against the claims, with Vanguard calling the ruling disappointing, and State Street calling the case a risk to investors and energy markets.

"By pursuing forced divestment, the Attorneys General are undermining the Trump Administration’s goal of American energy independence," BlackRock said.

The ruling by Kernodle, who was appointed by President Donald Trump, means the states can move forward with their claims that the asset managers violated U.S. antitrust law by joining Climate Action 100+, an investor initiative to take action to combat climate change, and used their shareholder advocacy in furtherance of its goals.

Kernodle, however, dismissed claims that the asset managers violated Louisiana and Nebraska consumer protection laws.

The companies have denied wrongdoing and called the case "half-baked." But the states' theories have garnered support from Trump-appointed antitrust enforcers at the U.S. Department of Justice and Federal Trade Commission.

The outcome of the lawsuit could have major implications for how the companies, which together manage some $27 trillion, approach their holdings and passive funds.

One possible remedy sought by the plaintiffs would be for the fund firms to divest holdings in coal companies, which BlackRock has said would harm the companies' access to capital and likely raise energy prices.