Nonprofit Sues Texas Over Law Targeting Fossil Fuel-Conscious Businesses
A nonprofit has filed a lawsuit against Texas, challenging a law that restricts state investments in companies supporting reduced fossil fuel use. The case highlights tensions between environmental policies and state regulations.
In a significant legal challenge, the American Sustainable Business Council has initiated a lawsuit against the state of Texas. The nonprofit, representing over 200,000 businesses, is contesting a 2021 law that prohibits state investments in companies perceived to be reducing their reliance on fossil fuels.
The legislation in question, Senate Bill 13, has been in effect for approximately three years. It bars Texas from investing in or contracting with businesses that the state deems to be "boycotting" the oil and gas industry. This action by Texas, the nation's leading oil producer, is part of a broader trend among Republican-led states to oppose environmental, social, and governance (ESG) policies they consider unfavorable.
The lawsuit, filed in the U.S. District Court for the Western District of Texas in Austin, names Republican Attorney General Ken Paxton and Comptroller Glenn Hegar as defendants. Both officials have been staunch supporters of Senate Bill 13 since its inception.
Under the law's provisions, Comptroller Hegar maintains a list of financial entities and investment funds believed to improperly target fossil fuel-based energy. As of August 2024, this list includes 16 financial companies and over 350 investment funds. Notable additions to the list include British bank NatWest, added just two weeks prior to the lawsuit, and asset management giant BlackRock.
The impact of this legislation has been substantial. In March 2024, the Texas Permanent School Fund, one of the largest educational endowments in the United States, announced the withdrawal of $8.5 billion in assets under management from BlackRock.
The American Sustainable Business Council argues that Senate Bill 13 has negatively affected its members, despite Texas's reputation as a business-friendly state. Two of its members, Etho Capital and Our Sphere, have funds included on Hegar's list.
"The law violates the First Amendment by barring companies from competing for state investments or contracting with the state whenever Texas believes those companies espouse a disfavored viewpoint about fossil fuels. Because SB 13 codifies viewpoint-based discrimination, it is presumptively unconstitutional."
This legal challenge underscores the ongoing tension between environmental policies and state regulations, particularly in regions heavily dependent on fossil fuel industries. The outcome of this case could have far-reaching implications for businesses operating in Texas and potentially influence similar legislation in other states.
As the lawsuit progresses, it will likely draw attention to the balance between state economic interests and constitutional rights, particularly freedom of speech as protected by the First Amendment. The case, officially titled American Sustainable Business Council v. Hegar et al, is now before the U.S. District Court for the Western District of Texas.
