On Thursday, a nonprofit organization that advocates for environmentally-friendly policies sued the state of Texas to challenge a law targeting businesses that support reducing reliance on fossil fuels.
The American Sustainable Business Council, representing over 200,000 businesses, argues that the 2021 law, known as Senate Bill 13, violates its members’ free speech rights by prohibiting Texas from investing in or contracting with companies that “boycott” the oil and gas industry.
Texas, the largest U.S. oil-producing state and a prominent Republican-led state, has been at the forefront of cracking down on businesses with environmental, social, and governance (ESG) policies that it opposes. The lawsuit, filed in federal court in Austin, names Texas Attorney General Ken Paxton and Comptroller Glenn Hegar, both Republicans, as defendants.
In response, Hegar accused the American Sustainable Business Council of pushing a “radical environmental agenda” that forces companies to prioritize politics over shareholders. He dismissed the lawsuit as a frivolous attempt to make Texas and its taxpayers invest “in a manner inconsistent with their values and detrimental to their own economic well-being.”
Hegar maintains a list of 16 financial companies and over 350 investment funds that he claims unfairly target fossil fuel-based energy through their ESG policies. Recently, he added the British bank NatWest to this list. In March, the Texas Permanent School Fund announced it would withdraw $8.5 billion of assets under management from BlackRock, another company on Hegar’s list.
The American Sustainable Business Council contends that Senate Bill 13 has harmed its members, including Etho Capital and Our Sphere, which have funds on Hegar’s list. The lawsuit asserts that the law violates the First Amendment by preventing companies from competing for state investments or contracts simply because Texas disapproves of their stance on fossil fuels. The council argues that since SB 13 enforces viewpoint-based discrimination, it is presumptively unconstitutional.
The case is titled American Sustainable Business Council v. Hegar et al, in the U.S. District Court for the Western District of Texas, No. 24-01010.
