At a time when millions of Americans are struggling financially, with everything from unaffordable housing prices to rising utility bills, inflationary pressure and volatile energy markets, the last thing they need is a political stunt masquerading as legal action. Yet that’s precisely what the lawsuit led by Texas Attorney General Ken Paxton (R), backed by a dozen other Republican attorneys general, represents.
Their complaint targets the ability of financial institutions to consider all risks, specifically environmental risks, when making investment decisions in the energy sector. It argues that three major institutional investors — BlackRock, State Street and Vanguard — had colluded to suppress coal production and manipulate energy markets. Yet minimal evidence has been presented to support allegations of illegal coordination, let alone market manipulation.
What we’re actually seeing is the financial system responding rationally to long-term economic trends, and the energy sector reflecting a decades-long trend.
Coal has seen a steep decline in both demand and profitability, with production dropping by more than 50 percent since 2008, driven by market forces like cheaper natural gas and the explosive growth of renewables. In 2023, global investment in clean energy surpassed $1.7 trillion, almost doubling the amount spent on fossil fuels. Even traditional oil and gas companies, such as Exxon and Shell, have begun diversifying their portfolios to remain competitive in a transitioning energy economy. This is not ideology — it’s economics.
Despite what they may claim, this alleged conspiracy and state-driven antitrust suit is not about protecting energy consumers or ensuring fair markets at all. It’s a dangerous, unprecedented expansion of antitrust and consumer protection laws that will ultimately harm the very communities most vulnerable to energy price shocks: low-income and minority Americans.
While this lawsuit is limited to the energy sector, it is standard operating procedure for Republican lawmakers when it comes to economic policy. It’s not surprising that Texas, one of the states joining the lawsuit, is among the poorest in the U.S. The leaders of these states have time and again promoted policies that cause financial hardships for their citizens. In fact, these are the same states that sued to stop student loan forgiveness, and many refused Medicaid expansion funding.
When it comes to energy policy, time and again, it’s marginalized communities that suffer the consequences first, whether it’s blackouts, utility bill spikes or power outages during natural disasters. When Texas faced catastrophic power outages during Winter Storm Uri, it was low-income and minority communities that endured the longest outages and the most devastating aftermath. These are the same communities that are most exposed to the health effects of pollution and least equipped to recover from climate-related disasters.
But beyond that, based on the arguments in the suit about what constitutes “passivity” and “control” in index funds managed by those same asset managers, the suit has the potential to upend how millions of Americans plan and save for retirement. Americans from many of those same communities rely on passive investment vehicles, such as index funds, as their primary means of building wealth.
Undermining those funds by forcing these asset managers to divest their coal holdings (one of the remedies suggested in the suit) or ignoring real, material risks in the energy sector would directly erode the retirement security of public school teachers, bus drivers, municipal workers and countless others already navigating financial precarity.
Index funds have long been a cornerstone of democratized investing in America. They offer an accessible, low-cost and simplified entry point into financial markets, breaking down barriers that have historically excluded many. As of 2024, more than $12 trillion is invested in index funds in the U.S. alone, with the vast majority of retirement savers, including public pensions, relying on them. More than 95 percent of large retirement plans include index funds as a primary investment option.
But instead of strengthening this critical lifeline for working Americans, this Republican lawsuit is the prime example of Republicans’ misguided economic policies. Their attacks on asset managers, through lawsuits and restrictive rules, jeopardize the stability of index funds and threaten the retirement security of millions. If these efforts succeed, they could force changes in how firms manage their holdings, triggering divestment and destabilizing the very foundation of retirement savings.
Evidence of a squeezed middle class is already mounting. CEOs across industries like dining, retail, fashion and airlines report that middle-class customers are increasingly strapped, even as high earners keep spending. Undermining index funds would only make that economic divide worse.
This isn’t about Wall Street — it’s about Main Street. Nurses, city employees, janitors and small-business owners depend on index funds to build wealth and secure their retirement. By blocking asset managers from responsibly managing risk, this lawsuit doesn’t just hurt investors, it also undercuts the progress that has finally given working and middle-class families a fair shot at long-term financial security.
Working middle-class families and minority communities already bear disproportionate burdens from both environmental and economic challenges, from higher energy costs to wage stagnation. The last thing they need is to lose access to one of the most effective tools for building savings and retirement security.
Kevin B. Kimble, Esq., is founder and CEO of the Financial Services Innovation Coalition.
