Competitive energy markets have long driven shifts in the U.S. power sector, with natural gas and renewables steadily overtaking coal. Over the past two decades, coal’s share of electricity generation has dropped dramatically, while natural gas has risen to dominate the energy mix at nearly 43% of capacity.
While the energy sector is steadily moving to a more environmentally friendly framework, an act of government intervention should alert consumers. A coalition of 12 states led by Texas Attorney General Ken Paxton filed a lawsuit in late 2024 accusing major asset managers of unlawfully coordinating to suppress investment in coal and acting as an “investment cartel.” The suit alleges these firms distorted energy markets and drove up consumer costs. This lawsuit highlights the importance of protecting the investor through prudent litigation with minimal government intervention.
On August 1, a U.S. District Judge in Texas largely denied a motion to dismiss the lawsuit. Of the 21 legal claims, only three were dismissed, allowing the core antitrust allegations to proceed. At the core of the lawsuit, is the claim that large institutional investors coordinated investment strategies in ways that altered market outcomes.
Experts have pointed out that consumers benefit from competition and choice. Whenever government intervenes, such as with investment companies, it can lead to a distortion in the market. Consumer choice is threatened as investment companies may be required to pivot to alternative investments that do not reflect the values or demand of investors.
As for investment companies, they have fiduciary responsibility to the investor. This lawsuit alleges one of the investment companies misled investors through false information. It was alleged their non-ESG, which stands for Environmental, Social, and Governance, funds were marketed in a way that led investors to believe these funds were not being used to promote an ESG agenda.
This could lead one to believe US investors may not be eager to invest in ESG funds. Reporting from Ernst & Young revealed that 66 percent of company investors will not consider ESG as much in the future while 92 percent believe that ESG-focused funding will hurt them on short-term investments. Information from global ESG investments do concede that ESG investing is better for long-term investments. But ultimately, this decision should be left to the individual investor and not swayed my political agendas.
It is important that government intervention is careful to address pertinent concerns void of political bias. Government intervention has the potential of adding layers of legal scrutiny or forced divestment which threatens the ability of markets to adapt organically. Litigants should be aware of the risks to the market before proceeding and understand the risks involved. It can create uncertainty, slow capital flow, raise costs, and undermine the competitive dynamics that benefit consumers. Ultimately, consumers still benefit from energy markets where innovation and price competition thrive.
Consumers should be driving investments, whether or not those include a focus of ESG, and government intervention should seek to preserve the free market, allowing the consumer to decide what is best for them. It is critical that Attorneys General do not devolve into de facto financial regulators.
At the American Consumer Institute, we believe markets are the best stewards of consumer welfare and should be kept free from external forces. This lawsuit should be treated with absolute care to avoid setting a precedent for government intervention in how investment companies can or should invest. In the end, it’s consumers who stand to lose.
Tirzah Duren is the President and CEO of the American Consumer Institute.
Leah Locke is a Finance and Insurance Policy Analyst at the American Consumer Institute. The American Consumer Institute is a nonprofit education and research organization. For more information about the Institute, follow us on X @ConsumerPal.