{"id":167960,"date":"2026-02-17T09:54:07","date_gmt":"2026-02-17T09:54:07","guid":{"rendered":"https:\/\/www.newsbeep.com\/us-tx\/167960\/"},"modified":"2026-02-17T09:54:07","modified_gmt":"2026-02-17T09:54:07","slug":"texas-fossil-fuels-ruling-may-be-a-step-back-for-anti-esg-laws","status":"publish","type":"post","link":"https:\/\/www.newsbeep.com\/us-tx\/167960\/","title":{"rendered":"Texas Fossil Fuels Ruling May Be a Step Back for \u2018Anti-ESG\u2019 Laws"},"content":{"rendered":"

A Texas federal court has upheld<\/a> a challenge to a Texas statute barring state public entities from investing or contracting with companies that seek to reduce reliance on fossil fuels\u2014a potential reprieve for environmental, social, and governance supporters. The decision in American Sustainable Business Council v. Hegar<\/a> could make it more difficult to frame constitutionally valid \u201canti-ESG\u201d legislation, which the Texas statute apparently was designed to be. <\/p>\n

Senate Bill 13 and the ensuing litigation mark another step in the debates over ESG issues, which have become a cause c\u00e9l\u00e8bre or a b\u00eate noire for different ends of the political spectrum. The statute<\/a>, signed into law in June 2021, contains two basic provisions:<\/p>\n

It prohibits certain state entities (state pension funds) from investing in, and requires them to divest from, financial companies that \u201cboycott energy companies.\u201dIt prohibits governmental entities from contracting for goods or services with companies that don\u2019t confirm in writing that they don\u2019t and won\u2019t \u201cboycott energy companies.\u201d<\/p>\n

The decision by the US District Court for the Western District of Texas emphasizes that any legislation that might affect expression of views on public or noncommercial matters must be sufficiently narrow and clear to withstand constitutional scrutiny. That principle extends to other politicized issues. For example, the court relied on several cases holding unconstitutional Texas\u2019 \u201c\u2018boycott Israel\u2019 law,\u201d which prohibited \u201c\u2018any action that is intended to penalize, inflict economic harm on, or limit commercial relations\u2019 with Israel.\u201d<\/p>\n

The lawsuit was filed by plaintiff American Sustainable Business Council, or ASBC, a membership organization representing more than 200,000 businesses \u201cin advocating for and advancing sustainable business practices.\u201d The Texas Comptroller allegedly placed the investment funds of two ASBC members on the state\u2019s \u201cblacklist\u201d for \u201cboycotting energy companies.\u201d<\/p>\n

ASBC contended<\/a> that the Texas law is unconstitutional because it \u201cimpermissibly infringes rights of free speech and association under a scheme of politicized viewpoint discrimination, based on no legitimate state interest.\u201d ASBC also said the law\u2019s key terms are \u201cundefined and vague\u201d and don\u2019t give regulated entities \u201cadequate notice of their prospective exclusion from competition for state investments and contracts.\u201d<\/p>\n

US District Court Judge Alan D. Albright, an appointee of President Donald Trump, granted partial summary judgment for ASBC, held that the statute is unconstitutional under the First and Fourteenth Amendments, and enjoined implementation and enforcement of the law.<\/p>\n

The court first ruled that the statute violates the First Amendment because it is facially overbroad. Rejecting defendants\u2019 argument that the statute applies only to unprotected \u201ccommercial conduct,\u201d the court held that the definition of \u201cboycott energy companies\u201d penalizes companies \u201cfor all manner of protected expression concerning fossil fuels.\u201d <\/p>\n

The court held that the term \u201cboycott energy companies\u201d as defined in the statute could encompass \u201cspeaking about the risks posed by fossil fuels, advocating against reliance on fossil fuels, and associating with like-minded organizations\u2014all forms of expression in which ASBC\u2019s members\u201d regularly engage.<\/p>\n

The court also concluded that the statute was unconstitutionally vague, in violation of the Due Process Clause of the Fourteenth Amendment. The statutory definition of \u201cboycott energy companies\u201d \u201cfails to provide a reasonable opportunity to know what conduct is prohibited\u201d and \u201cinvites\u2014and has in fact already led to\u2014discriminatory enforcement.\u201d The statute therefore doesn\u2019t give reasonable opportunities for people to know what is and isn\u2019t allowed and doesn\u2019t have clear compliance standards.<\/p>\n

SB 13 was an overt attempt to address and influence investing and contracting. While some governmental entities and financial firms have sought to promote ESG considerations as relevant investment criteria due to perceived long-range financial impacts and sustainability concerns, others have fought to exclude those considerations from financial decision-making. <\/p>\n

The ASBC ruling focuses on the speech and expression burdens that a state may or may not impose on those entities. It doesn\u2019t take sides on the substantive issue of the extent to which financial professionals can or should consider environmental, social, or other allegedly \u201cnonfinancial\u201d objectives in investment decision-making.<\/p>\n

But SB 13 illustrates how governmental efforts to restrict those considerations can interfere with financial professionals\u2019 ability to do their jobs as they see fit. Some professionals and investors across the political spectrum have complained that anti-ESG edicts have hampered their ability to use their best judgment to generate financial returns. <\/p>\n

And in a suit brought by the Securities Industry and Financial Markets Association, an Oklahoma court enjoined enforcement of an Oklahoma statute blocking government retirement systems from investing in companies or funds that allegedly boycott energy companies for not meeting environmental standards beyond those prescribed by federal and state law.<\/p>\n

In light of the political considerations that appear to have motivated the Texas statute\u2019s enactment, an appeal to the US Court of Appeals for the Fifth Circuit seems likely. Stay tuned to see how SB 13 keeps playing out in court.<\/p>\n

The case is American Sustainable Business Council v. Hegar<\/a>, W.D. Tex., 1:24-CV-01010-ADA, opinion 2\/3\/26.<\/p>\n

This article does not necessarily reflect the opinion of Bloomberg Industry Group, Inc., the publisher of Bloomberg Law, Bloomberg Tax, and Bloomberg Government, or its owners.<\/p>\n

Author Information<\/p>\n

Jonathan Richman<\/a> is a partner in Brown Rudnick\u2019s white collar defense, investigations, and compliance practice group.<\/p>\n

Write for Us: Author Guidelines<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"A Texas federal court has upheld a challenge to a Texas statute barring state public entities from investing…\n","protected":false},"author":2,"featured_media":167961,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[6],"tags":[12918,22091,68167,68166,4136,27,29,28],"class_list":{"0":"post-167960","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-texas","8":"tag-constitutional-law","9":"tag-esg","10":"tag-fossil-energy","11":"tag-investments-by-retirement-plan","12":"tag-sustainability","13":"tag-texas","14":"tag-texas-headlines","15":"tag-texas-news"},"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/us-tx\/wp-json\/wp\/v2\/posts\/167960","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/us-tx\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/us-tx\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us-tx\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us-tx\/wp-json\/wp\/v2\/comments?post=167960"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/us-tx\/wp-json\/wp\/v2\/posts\/167960\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us-tx\/wp-json\/wp\/v2\/media\/167961"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/us-tx\/wp-json\/wp\/v2\/media?parent=167960"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/us-tx\/wp-json\/wp\/v2\/categories?post=167960"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/us-tx\/wp-json\/wp\/v2\/tags?post=167960"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}