A progressive business group has taken legal action against the state of Texas over a 2021 law that limits state investments in companies accused of “boycotting” the fossil fuel industry. The lawsuit, filed by the American Sustainable Business Coalition, argues that the law, known as Senate Bill 13, infringes on constitutional rights and unjustly targets companies for their environmental stances.
Challenging the Anti-ESG Law
The American Sustainable Business Coalition filed the lawsuit on Thursday, naming Texas Attorney General Ken Paxton and Comptroller Glenn Hegar as defendants. The group asserts that Senate Bill 13 constitutes viewpoint discrimination, violating the First Amendment, and denies companies due process under the Fourteenth Amendment. They are seeking a federal judge’s ruling to declare the statute unconstitutional and to block its enforcement.
“Texas has long presented itself as a business-friendly state where limited regulation allows businesses to operate freely,” the group’s lawyers stated. “However, SB 13 was enacted to coerce and punish businesses that have publicized or achieved goals to reduce reliance on fossil fuels.”
Details of Senate Bill 13
Senate Bill 13, often referred to as the “anti-ESG law” (Environmental, Social, and Governance), mandates that state entities, including pension funds and educational endowments, divest from companies that are deemed to be “boycotting” fossil fuels. The law also requires state agencies to avoid doing business with any firm that cannot affirm its non-participation in such boycotts.
The law defines “boycott” as refusing to engage in business with fossil fuel companies without an ordinary business purpose, or taking actions intended to harm or limit relations with these companies. The Texas comptroller is responsible for maintaining a blacklist of firms based on publicly available information and company statements.
Response from Texas Officials
Comptroller Glenn Hegar dismissed the lawsuit as an “absurd” attempt to force Texas to invest in ways that contradict state values. He argued that the law protects the economic well-being of Texas taxpayers and prevents companies from following what he described as a “radical environmental agenda” that could harm shareholder interests.
“This left-wing group is trying to force companies to adhere to an environmental agenda that often conflicts with shareholder interests,” Hegar said in a statement. “This lawsuit is an attempt to impose politics over profits.”
Legal Arguments Against SB 13
The lawsuit filed by the American Sustainable Business Coalition argues that climate change poses legitimate risks that justify sustainable investment strategies. The group contends that Senate Bill 13 was designed to suppress what Republican lawmakers saw as a “burgeoning fossil fuel discrimination movement” and that it infringes on companies’ rights to free speech and association.
The lawsuit also claims that the law’s vague language invites arbitrary enforcement, denying blacklisted companies a fair process to challenge their designation. Two climate-focused firms represented by the coalition, Etho Capital and Sphere, were among those blacklisted under the statute.
“SB 13 punishes companies for their environmental policies and compels them to align with Texas officials’ positions as a condition of doing business with the state,” the lawsuit asserts.
