Quick Take

Vanguard Settles on ESG — BlackRock and State Street Fight On

April 7, 2026

On February 26, Vanguard settled in Texas v. BlackRock, the flagship anti-ESG antitrust case brought by red-state attorneys general against Blackrock, State Street, and Vanguard Investments. Texas had filed the action in November 2024, accusing the “Big 3” asset managers of colluding to destroy the coal industry by joining climate action coalitions, and last summer a federal judge ruled that the legal theory was viable.

Vanguard agreed in its settlement to pay $29.5 million, withdraw from any climate commitments, and abide by a series of “Passivity Commitments.” Most notably, in constructing investment funds, Vanguard will not use divestment (or its threat) to incentivize better corporate behavior on environmental and social (E&S) issues. And in engaging with the companies it invests in, Vanguard will not oppose company directors (or threaten to do so) as a lever to change corporate E&S conduct.

Vanguard thus abandoned the best mechanisms for achieving the original goal of sustainable investment and engagement: using investor influence with business to protect people and the planet. Scholars show that opposing company directors is a uniquely effective stewardship tactic, and credit the Big 3 for the progress of women in the boardroom. The settlement preserves all forms of corporate “governance” stewardship. ESG has been chopped down to size, and now only the G remains.

The significance of Vanguard’s settlement is in the eye of the beholder. Texas attorney general Ken Paxton calls it historic, industry-changing, monumental, and one-of-its-kind. The law firm Ropes and Gray says Vanguard only agreed to current industry norms. Both are correct. Vanguard’s deal confirms a historic victory for the anti-ESG movement that has, in large part, already been secured. The surprise is less that Vanguard settled than that Blackrock and State Street did not. For what are Blackrock and State Street still fighting?

US asset managers have been in retreat on ESG stewardship since Republican lawmakers began decrying environmental, social and governance initiatives at the start of the Biden administration. The Trump administration’s active opposition to ESG policies hastened the US corporate withdrawal. By way of illustration, industry-leading BlackRock has reduced its support for E&S shareholder resolutions year by year, from over 40% in 2021 to under 2% in 2025. Last year the Wall Street Journal proclaimed: “BlackRock’s Woke Era is Over.”

Capping off the trend, the Net Zero Asset Managers (NZAM) coalition relaunched the same day Vanguard settled, without its former commitment to reach “net zero” carbon emissions by 2050—and without any top-tier asset management firms based in the US. Before the red state AGs’ crusade, NZAM had signed up 18 of the top 20 US asset managers, each with over $1 trillion in current assets under management.

Still, the victory of the anti-ESG movement is not complete, and exactly how far it goes matters. In refusing to settle, Blackrock and State Street might be taking a last-ditch stand over their right to engage on issues like climate reporting and boardroom diversity.

In its latest stewardship guidelines, Blackrock stands by two baseline beliefs. It insists that sustainability reporting, as under the IFRS Sustainability Standards, “supports investors in making informed decisions.” And it reserves the right not to approve company directors on a board that’s a sustained market outlier in “its variety of experiences, perspectives, and skillsets.” Without quite using the word “diversity,” a footnote alludes to a director’s “demographic background, including gender, race/ethnicity, disability, US.. veteran status, LGBTQ+ identity, and national, indigenous, religious, or cultural identity.” Accordingly, Blackrock last year opposed 124 company-nominated directors because their companies lag on climate reporting. In 2024 it withheld support from 871 directors because their firms fall short on “boardroom composition.” Those numbers are down by nearly half from their peak levels, yet they appear to have stabilized in 2025.

Will BlackRock and State Street prevail in court—and preserve what remains of sustainability stewardship among US asset managers? On the merits they have a strong case. Surely the fall in coal production was caused by rising renewable demand and falling renewable costs, rather than by financiers joining a climate club. More meaningful actions (like Blackrock divesting from thermal coal) had procompetitive effects, like encouraging clean coal innovation.

Even if the asset managers lose at trial, they should prevail on appeal. The argument most likely to sway the appellate bench is that investors have a right to express their First Amendment beliefs through ESG investment and engagement. But the wisest judges would also recognize that antitrust is designed to protect society from overweening corporate power—not to give business impunity for social harms. When global warming arrives in full force, cheap coal will be cold comfort to all consumers, and to all investors.