Paxton’s Coal Lawsuit Threatens Texas’s Pro-Business Reputation

By Chuck Meyer

In recent years, Republican attorneys general have taken an increasingly aggressive posture toward ESG-driven investing, arguing that large asset managers have used their market power to push political objectives into sectors critical to the American economy. In some cases, that scrutiny has been warranted. When financial institutions blur the line between risk management and ideological advocacy, policymakers are right to ask hard questions.

But not every effort to rein in ESG is created equal. Some risk going well beyond oversight and into something far more consequential: the use of state power to second-guess ordinary investment behavior and reshape markets through litigation.

That is what makes Texas v. BlackRock so concerning.

Attorney General Ken Paxton has cast the case as a necessary stand against coordinated efforts by politically disfavored investment managers to undermine coal. In reality, it is a far more ambitious—and far more dangerous—attempt to use antitrust law as a tool of state-directed investment policy. He is asking a court to bless the proposition that large-scale investment stewardship, proxy voting, and long-term portfolio risk judgments can be recast as unlawful output suppression whenever the attorney general dislikes the result. That is an astonishing thing for a Texas officeholder to champion.

Texas built its prosperity by attracting capital, but Mr. Paxton’s lawsuit sends a warning to investors that politically inconvenient decisions may later be rebranded as cartel behavior. If institutional investors are taught that ownership, engagement, and stewardship in politically sensitive sectors can later be weaponized into antitrust claims, they will not become bolder. They will become more cautious. Some will scale back. Some will stay away. And the cost of that uncertainty will be borne not by asset managers, but by the producers, workers, and communities that depend the reliable financing that underwrites the coal industry. Recent settlements in the case have only reinforced the sense that this litigation is introducing a new layer of market risk.

This runs directly against the broader direction of federal energy policy. The Trump administration has made clear that maintaining reliable, dispatchable power is a national priority. As Energy Secretary Chris Wright put it when asked about the potential for forced divestment from the coal industry, “Everyone would be a loser.” Those are not abstract concerns. They reflect a recognition that discouraging investment in critical energy infrastructure ultimately undermines supply, reliability, and affordability.

The stakes are not theoretical in Texas either. Coal remains a meaningful contributor to the state’s economy, particularly in manufacturing and power generation communities. In 2022, coal mining and coal-related activities contributed approximately $659.5 million to Texas GDP. Those figures represent jobs, local tax bases, and economic stability in regions that depend on consistent energy investment.

The timing makes this gamble even more problematic. The U.S. power sector is expected to require as much as $1.4 trillion in investment over the next decade to meet rising demand. In that environment, policymakers should be focused on keeping capital flowing into generation and grid reliability. Instead, this lawsuit sends the opposite signal, telling markets that in Texas, even routine investment behavior may carry legal risk if politics changes the label of such activity.

To be sure, if investors truly entered unlawful agreements to suppress output and raise prices, antitrust law should apply. But that is not the most important question here. The more pressing issue is whether Texas wants to be seen as a jurisdiction willing to police politically disfavored investment firms and behavior through expansive and untested legal theories. For a state that has long marketed itself as pro-business, that is a dangerous message to send.

There is a difference between holding markets accountable and attempting to manage them through litigation. If this case succeeds in chilling capital, raising legal uncertainty, and deterring investment in critical energy sectors, the consequences will not be confined to the courtroom. They will be felt in higher costs, reduced reliability, and fewer opportunities for the very workers and communities this lawsuit purports to protect.

Texas has built its economic strength by remaining open to investment and grounded in free-market principles. Preserving that reputation requires discipline, especially when confronting complex and politically charged issues like ESG. Not every fight is the right one – and in this case, the risks far outweigh the rewards.

Chuck Meyer is the principal at the Law Firm of Chuck Meyer PLLC, and is the former Chief Legal Officer of Research In Motion Limited (now BlackBerry). He is also registered patent attorney.