Texas was sued Thursday by a nonprofit group seeking to block a state law that targets companies that support environmentally friendly policies and reducing reliance on fossil fuels.
The American Council for Sustainable Business said the 2021 legislation, known as Senate Bill 13, violates lawmakers’ free speech rights by barring Texas from investing in or contracting with companies that “boycott” the oil and gas industry.
Texas is one of the largest and most prominent Republican-led states cracking down on companies that don’t favor environmental, social and governance (ESG) policies. It’s also the largest oil-producing state in the United States.
State Attorney General Ken Paxton and State Auditor Glenn Hegar, both Republicans who backed the 2021 law, were named as defendants in the lawsuit filed in federal court in Austin, Texas.
In a statement, Hegar accused the plaintiffs of pursuing a “radical environmental agenda” that would require companies to put politics above shareholders.
He said the lawsuit is a frivolous attempt to force Texas and its taxpayers to invest “in ways that are counter to their values ​​and detrimental to their own economic well-being.” “This is absurd.”
Paxton’s office did not immediately respond to a request for comment.
In connection with the 2021 legislation, Heger maintains a list of 16 financial companies and more than 350 investment funds whose ESG policies he believes unfairly target fossil fuel-based energy.
Two weeks ago, Hegar added Britain’s NatWest bank to the list. In March, Texas Permanent School Fund said it was pulling $8.5 billion in assets from BlackRock, which also appears on the auditors’ list.
The American Council for Sustainable Business said Senate Bill 13 harms its corporate and individual members, who represent more than 200,000 companies, even though Texas touts itself as a business-friendly state.
Hegar’s list includes two member funds: Etho Capital and Our Sphere.
“Texas violates the First Amendment by prohibiting companies that promote unfavorable views on fossil fuels from competing for state investments or receiving state contracts if the state approves such companies,” the lawsuit states. “Because SB 13 codifies view-based discrimination, it is presumptively unconstitutional.”
The case is American Sustainable Business Council v. Hegar et al., U.S. District Court, Western District of Texas, Case No. 24-01010.
