In a recent RealClearMarkets piece, Market Institute President Charles Sauer takes aim at a misguided lawsuit filed by 11 Republican attorneys general against major asset managers. The suit alleges that participation in climate-focused investment coalitions constitutes illegal collusion that’s harming the coal industry and raising electricity prices.
But as Sauer explains, the facts — and the market — tell a different story.
“Coal consumption in the U.S. has been declining steadily for years – not because of a conspiracy, but because natural gas is cheaper and cleaner, and because renewable energy is becoming increasingly competitive.”
Coal’s decline isn’t a mystery. It’s a decades-long trend driven by cost efficiency and innovation. Natural gas, renewables, and changing technologies have outcompeted coal, not climate activists. Yet this lawsuit blames asset managers — particularly those that manage passive index funds — for alleged market manipulation.
Sauer dismantles this claim:
“It doesn’t make sense to invest money in order to lose money. If upheld, the impact on financial markets could further harm the coal industry and potentially upend index funds for retail investors – thereby increasing prices even more.”
At its core, the lawsuit threatens the legal foundation of index fund investing, which has become the bedrock of retirement savings for millions of Americans. These funds are passive vehicles — not activist entities.
“Asset managers are passive, minority investors in these coal companies through index funds purchased by retail investors. And so far, no court or regulator has ever found that index funds holding only minority interests are anything other than passive investors.”
If courts accept this novel interpretation of antitrust law, it could end the “investment-only” exemption, forcing major changes in how funds are structured — and making index investing more expensive and less accessible.
The stakes are high:
“In 2021, over 95% of larger retirement plans and 89% of smaller plans offered index funds to American savers. This lawsuit threatens an investment staple – one that has made investing more accessible to millions of Americans.”
Sauer concludes with a reminder that should resonate with conservatives:
“Conservatives have long argued that markets work better than mandates, and that government should not pick winners and losers. This lawsuit turns those values upside down – at the expense of the everyday investor.”
