Anti-ESG lawsuit could undermine Trump’s coal industry revival plans

Recent news on coal company bankruptcies serve as natural experience on the confrontation between various federal and state objectives, regulations, disputes and realities of the market. He also underlines the importance of having a coherent global policy which helps to reach the president Donald Trump‘s energy agenda.

In his two campaigns, President Trump said he would like to see a revival of the American coal industry, which has been decimated over the years. The executive decree (EO) of President Trump (EO) describes various stages of the lifting of obstacles to the extraction of coal, to the classification of the metallurgical coal used in the production of steel in the category of “critical minerals”.

While coal loses its importance in electricity production, both in the United States and other developed countries, it still represents a third of global electricity production. With the right investments and the desire to make coal more efficient and environmentally friendly, the United States can play a leading role in the future of the global coal industry which includes investments in new generation technologies to reduce the environmental footprint of coal. Actually, Trump president Underlines “clean” on several occasions and emphasizes “accelerating the development of coal technologies”. But an integral part of the plan should be to arouse sufficient interest in the private market to finance the necessary investments in the charcoal industry in narrowing.

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There was a well -intentioned but unexpected obstacle, which was potentially in the field of this objective: until recent years, the global push for the environment, social and governance (ESG) has generally targeted the fossil fuels industry and the charcoal industry specifically. The purpose of these ESG policies was worrying for the fossil fuels industry While the pressure to reduce carbon emissions has intensified in the chambers of the board of directors and the States led by the Democrats.

These objectives aimed to reduce investments in industry by different means, such as the introduction of strict reports. Many have opposed these objectives, emphasizing energy realities and a growing global energy demand that required healthy investments in the sector.

Since the 180 -degree tour in the political arena last November, the ESG has become silent. The main financial institutions, from banks to asset managers, have largely returned to maximizing yields, causing a mass exodus of ESG organizations as Action Action 100+, the Net Zero Banking Alliance (NZBA) and the Net Zero Asset Managers (Nzami) initiative.

However, today, we are faced with another threat to Essential investments In the energy sector – ironically not from those who seek to eliminate fossil fuels, but those who claim to protect them.

Citing ESG, Texas has directed 10 other public state prosecutors in an antitrust trial against Vanguard, Blackrock and State Street, accusing the main managers of carbon companies like Peabody Energy and Arch resources to reduce coal production, which increases the energy costs for consumers.

If he is at fault, these companies – who have already been accused of boycotting the fossil fuels industry – would be required to give up their assets in the companies listed in the trial: Peabody Energy, Core Natural Resources, Nacco Industries, Alpha Metallurgical Resources, Vistra Energy, Hallador Energy, Warrior Coal and Black Hills Corporation. It is a result that many green groups could not dream that about a year ago.

By forcing Vanguard, Blackrock and State Street to get out of their assets, the coal industry would lose nearly $ 18 billion ($ 17.9 billion) in capital – considerably undergoing President Trump’s goal to relaunch the American coal industry.

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There are several problems with this dispute: experts have discussed the reasons for the rapid decline in coal since the early 2010s. Abundant and economic natural gas developments, renewable energy developments, federal and state climate regulations and, of course, are recognized as major culprits for decline, not active managers. In addition, these asset managers appointed in the costume are all purely passive and minority investors in these companies through index funds. It would be difficult to connect the drop in industry to the management of their investments – which collectively contain only between 8.3% and 34.19% of the shares of coal companies according to the trial.

But what this trial will be is to strangle the funds that could be used to modernize and develop industry, which leads to a drop in the higher resource and energy prices.

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If the markets are an indication of the way investors see this dispute, seek no further than the stock market following the announcement of the DOJ and the FTC of President Trump in support of the trial. On May 22, the equity courses of several large coal companies (Peabody, Hallador and Core Natural Resources) closed in the red despite the global market ending the day (Dow Jones, Nasdaq and S&P 500). This can only hasten the disappearance of the industry, rather than “invigorate the beautiful industry of the own coal of America” ​​as the president envisaged.

The second Trump administration came with a goal from secure and abundant energy. Each policy or administrative action must take into account how the process and remedies can compete with each other and become a roadblock in terms of this vision. This dispute is a perfect example of how things can be found with involuntary consequences.