Recent news about coal company bankruptcies serves as a natural experiment on the clash between various federal and state goals, regulations, litigation, and market realities. It also underscores the importance of having a coherent overarching policy that helps achieve President Donald Trump’s energy agenda.
In both of his campaigns, President Trump stated that he would like to see a revival of the U.S. coal industry, which has been decimated over the years. President Trump’s April 2025 executive order (EO) outlines various steps from lifting barriers to coal mining, to classifying the metallurgical coal used in steel production in the “critical minerals” category.
While coal has been losing its prominence in electricity generation, both in the U.S. and other developed countries, it still represents one-third of global electricity generation. With the right investments and a drive to make coal more efficient and environmentally friendly, the U.S. can play a prominent role in the future of the global coal industry that includes investment in next-generation technologies to reduce coal’s environmental footprint. In fact, President Trump’s EO underlines “clean” several times and emphasizes “accelerate development of coal technologies.” But one integral part of the plan should be to generate enough interest in the private marketplace to fund the necessary investments in the quickly shrinking coal industry.
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There was one well-intentioned, but unexpected hurdle that potentially stood in the way of this goal: up until the last few years, the global push for Environmental, Social and Governance (ESG) targeted the fossil fuel industry broadly and the coal industry specifically. The goal of these ESG policies was concerning for the fossil fuel industry as the push to reduce carbon emissions intensified in board rooms and Democrat-led states.
These targets aimed to lower investments in the industry through different means, such as introducing stringent reporting requirements. Many opposed these targets, pointing to energy realities and an increasing global energy demand that required healthy investment in the sector.
Since the 180-degree turn in the political arena last November, ESG has gone mute. Major financial institutions, from banks to asset managers, are largely back to focusing on maximizing returns, causing a mass exodus from ESG organizations like Climate Action 100+, the Net Zero Banking Alliance (NZBA), and the Net Zero Asset Managers Initiative (NZAMI).
However, today we face another threat to much-needed investments in the energy sector – ironically not from those seeking to eliminate fossil fuels, but those claiming to protect them.
Citing ESG, Texas led 10 other Republican state attorneys general in an antitrust lawsuit against Vanguard, BlackRock, and State Street, accusing the major asset managers of pressuring coal companies like Peabody Energy and Arch Resources to reduce coal production, effectively driving up energy costs for consumers.
If found at fault, these companies – who have been previously accused of boycotting the fossil fuel industry – would be required to divest their holdings in the companies listed in the lawsuit: Peabody Energy, Core Natural Resources, NACCO Industries, Alpha Metallurgical Resources, Vistra Energy, Hallador Energy, Warrior Met Coal, and Black Hills Corporation. This is a result that many green groups could only dream about a year or so ago.
By forcing Vanguard, BlackRock, and State Street to fully divest from their holdings, the coal industry would lose nearly $18 billion ($17.9B) in capital – severely undermining President Trump’s goal to revive the American coal industry.
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There are multiple problems with this litigation: experts have been discussing the reasons behind the quick decline of coal since the early 2010s. Abundant and economical natural gas, renewable energy developments, cheap Chinese steel and, of course, federal and state climate regulations are recognized as major culprits for the decline, not asset managers. In addition, these asset managers named in the suit are all purely passive, minority investors in these companies through index funds. It would be hard to connect the decline in the industry to the management of their investments – which collectively only hold between 8.3% – 34.19% of shares in the coal companies according to the lawsuit.
But what this lawsuit will do is to strangle the funds that could be used to modernize and grow the industry, ultimately leading to a lower resource base and higher energy prices.
If the markets are an indication of how investors see this litigation, look no further than the stock market following the announcement of President Trump’s own DOJ and FTC filing in support of the lawsuit. On May 22, the share prices of several major coal companies (Peabody, Hallador, and Core Natural Resources) closed in the red despite the overall market ending the day up (Dow Jones, Nasdaq, and the S&P 500). This could only hasten the demise of the industry, rather than “reinvigorating America’s beautiful clean coal industry” as the President has envisioned.
The second Trump administration came in with a goal of secure and abundant energy. Every policy or administrative action should take into consideration how the process and remedies can clash with each other and become a roadblock in the way of achieving this vision. This litigation is a perfect example of how things can end up with unintended consequences.
