Vanguard has agreed to pay $29.5 million and adopt a series of restrictions on its stewardship activities to settle a multi-state lawsuit alleging that it coordinated with other major asset managers to influence coal production through environmental, social and governance initiatives.

The case was led by Texas Attorney General Ken Paxton and joined by ten other Republican-led states. In announcing the settlement, Paxton described the agreement as a significant enforcement action related to coordinated ESG-driven market behavior.

The settlement specifies that Vanguard does not admit wrongdoing and entered the agreement to avoid the cost and burden of extended litigation.

Allegations Centered on Coal Market Influence

The lawsuit, filed in 2024, alleged that Vanguard, along with BlackRock and State Street, accumulated substantial shareholdings in publicly traded U.S. coal producers and used that influence to pressure companies to reduce coal output. According to the complaint, such actions were intended to align with climate-focused investment initiatives and contributed to higher energy costs.

The states argued that the asset managers violated the Clayton Act by acquiring stakes that could lessen competition and by allegedly acting in concert to influence production levels across the industry. The complaint referenced participation in initiatives such as the Net Zero Asset Managers Initiative and Climate Action 100+, asserting that these platforms facilitated coordinated engagement with portfolio companies around emissions reductions.

In May 2025, the U.S. Department of Justice and Federal Trade Commission issued a statement expressing support for the case, stating that federal authorities would examine antitrust implications related to ESG-related coordination.

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Settlement Imposes “Passivity Commitments”

Under the agreement, Vanguard has committed to a series of measures described as passivity commitments. The firm pledged that it will not advocate to portfolio companies that they adopt specific actions to reduce carbon emissions. It also agreed not to threaten or undertake divestment as a condition for corporate action or inaction related to environmental objectives.

In addition, Vanguard agreed to withdraw from the United Nations-backed Principles for Responsible Investment. The firm had previously announced that it would remove its U.S. business from the PRI in late 2025.

The settlement also requires Vanguard to expand proxy voting choice. The firm will make voting options available to investors in funds representing at least 50 percent of assets invested in U.S. equity funds advised by Vanguard.

These commitments are designed to clarify the firm’s role as a passive investor and limit its involvement in coordinated ESG advocacy efforts.

Other Defendants Continue to Contest Claims

BlackRock and State Street have not announced settlements in the case. Both firms have publicly rejected the allegations. BlackRock has described the lawsuit as based on an unfounded theory, while State Street has characterized the claims as without merit and warned that the case advances an expansive interpretation of antitrust law.

The legal dispute reflects broader political and regulatory tensions surrounding the role of ESG considerations in investment decision-making and corporate governance. While some policymakers argue that coordinated climate engagement may distort markets, others contend that managing climate-related financial risk falls within fiduciary responsibilities.

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Implications for ESG Stewardship and Antitrust Scrutiny

The Vanguard settlement may influence how large asset managers approach collaborative climate initiatives and shareholder engagement in sectors tied to fossil fuels. The imposition of passivity commitments suggests increased scrutiny of coordinated stewardship activities, particularly when multiple institutional investors hold substantial stakes in concentrated industries.

At the same time, the absence of wrongdoing admission leaves unresolved legal questions regarding the intersection of antitrust law and investor engagement around climate risk.

As litigation continues against other defendants, the case is likely to shape future debate over the boundaries of collective action in sustainable investing and the degree to which asset managers can coordinate engagement efforts without triggering competition concerns.

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