Last week, Vanguard settled a lawsuit brought forward by Texas and 10 other Republican-led states that alleged the asset manager colluded with industry peers BlackRock and State Street to artificially constrict coal prices.
The three asset managers initially filed a joint motion to dismiss the state-level charges, but that was denied in August. Vanguard became the first of the three largest U.S. asset managers to settle the legislation when Texas Attorney General Ken Paxton announced the firm would pay the 11 suing states a total of $29.5 million.
The settlement also requires Vanguard to withdraw its U.S. businesses from and refrain from joining any groups with “climate-focused investment or stewardship objectives” or that “advocates for the setting of specific output or emissions targets.” Other injunctive relief, includes a commitment to a level of passivity when it comes to U.S. equity investments and engagements and a promise to expand its investor proxy choice program.
Ben Steinberg, an antitrust litigator for law firm Shinder Cantor Lerner, called Vanguard’s settlement “a significant development in the broader battle over ESG litigation, but it's one that is hard to interpret,” in an interview with ESG Dive. Prior to the failed dismissal, Steinberg wrote in April 2025 that the legal antitrust theory Republicans are pursuing is novel in how it’s being used to combat climate progress.
“On the one hand, there is a significant amount of money being paid, as well as injunctive terms,” Steinberg said. “But in the broader scheme of the ESG landscape and the amount of money that Vanguard has, this settlement could also be characterized as a moderate settlement that doesn't bode, necessarily, in one direction or the other.”
Editor’s note: This interview has been edited for length and clarity.
ESG DIVE: What have you been following in this case and what did you make of Vanguard’s settlement?
BEN STEINBERG: The lawsuits are a weaponization of the antitrust laws, which is not to say that they don't have merit, necessarily, but they are an aggressive use of the antitrust laws to pursue political goals.
The motion to dismiss is just an initial decision, and it doesn't offer a lot of clarity into the facts of the case, but it does give you a sense of how the court is initially approaching some of the legal issues. I think that the court's decision largely supported the legal theories that the states were pursuing and put wind in the sails of the states.
There hasn't been a lot of substantive developments in the case since the judge's decision last year. Discovery was just ramping up and being negotiated, so it's hard to get a sense of the current status of this case and what the underlying evidence actually shows. But based on the judge's motion to dismiss the order, it's clear that he is generally receptive to the state's legal theories, which I think was helpful to the states.
In terms of the Vanguard settlement, it's a bit hard to interpret what that settlement signifies for the case generally. It's certainly being portrayed as a win by the Texas Attorney General.
The amount of money is above the threshold that we would consider a nuisance payment. Sometimes you see settlements for $2, $3, $4, $5 million and those can be written off or contextualized as basically just kind of covering your legal fees. This seems to be above the level of a "nuisance settlement.” This was close to $30 million; that's real money.
In the scheme of Vanguard's business, it doesn't strike me as a particularly large sum. So — without knowing the decision-making of the people involved in the lawsuit — I think part of that could just be an attempt to get out of the lawsuit. It doesn't necessarily signify the strength of the evidence or Vanguard's understanding of the strength of the case. For a company of that size, $30 million is not all that significant.
In terms of the injunctive relief, there's a handful of terms there that I think are basically just enshrining practices that Vanguard already has. Then there are also some injunctive terms regarding Vanguard, you know, not joining climate initiatives that probably align with what Vanguard was already planning to do. There's been a widespread pulling back from these ESG initiatives, and so Vanguard's promise not to effectively participate in any industry initiatives around reducing climate is consistent with the momentum in the industry. But it’s also significant, in that it basically cements those policies and prevents any potential for there to be renewed movement towards ESG initiatives.
What does that injunctive relief, regarding climate groups, signal to the broader asset manager community?
It signals that there is not much interest from the large money managers to go back to [pro-ESG policies]. And now there's not really a practical path, at least for Vanguard, to do that.
I don't think that there was much momentum to go back there anyway. But I view this as sort of a stamp or a marker that basically says there's not going to be a movement back [in that direction] anytime soon, at least from Vanguard.
And I think it's fair to expect that the lack of any willingness to do so by Vanguard is probably similar to other money managers and perhaps other large financial firms as well.
In terms of the underlying legal theory, what implications does this case and even the settlement hold for this type of litigation going forward?
It is hard to say. I think if this settlement was in the hundreds of millions of dollars, it would be a massive boost to the confidence of the states and a foreshadowing of weakness with respect to the other defendants’ posture in the case. But that was not what we saw here.
The current settlement is more of a lukewarm settlement that doesn't necessarily suggest that this case is very strong, but it also doesn't suggest that the case is very weak. I don't think it necessarily dictates what the other defendants will do in this case or what the states will do. It may provide some boost to the states who are the plaintiffs, but this is not the type of settlement that provides a compelling clue as to where the rest of the litigation will head.
