• Free Speech at Stake: A nonprofit group argues Texas’ anti-ESG law violates constitutional rights.
• Financial Impacts: The law targets businesses perceived to boycott the oil and gas industry, affecting investments and contracts.
• State Defense: Texas officials defend the law, claiming it protects state values and economic interests.

Texas is facing a legal challenge from the American Sustainable Business Council (ASBC), a nonprofit organization advocating for environmentally sustainable business practices. The lawsuit, filed on Thursday in Austin’s federal court, aims to block a state law that restricts Texas from investing in or contracting with businesses that support reducing reliance on fossil fuels.

Senate Bill 13, enacted in 2021, prohibits Texas from engaging with companies that, according to the state, “boycott” the oil and gas industry. The ASBC argues this law infringes on free speech rights by penalizing businesses based on their stance on environmental, social, and governance (ESG) issues.

Texas Comptroller Glenn Hegar, a named defendant in the case, defended the law, stating: “This lawsuit is a frivolous attempt to force Texas and its taxpayers to invest in a manner inconsistent with their values and detrimental to their own economic well-being. That is absurd.” Hegar has been vocal about maintaining a list of companies, including NatWest and BlackRock, whose ESG policies he believes unfairly target fossil fuel energy.

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The ASBC, representing over 200,000 businesses, claims the law has harmed its members, including companies like Etho Capital and Our Sphere, which are on Hegar’s list. The nonprofit argues that Senate Bill 13 “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.” The lawsuit states, “Because SB 13 codifies viewpoint-based discrimination, it is presumptively unconstitutional.”

The case, American Sustainable Business Council v. Hegar et al, is set to proceed in the U.S. District Court for the Western District of Texas. Texas Attorney General Ken Paxton, also named in the suit, has yet to respond publicly to the litigation. The outcome could have significant implications for state laws regulating ESG policies and corporate freedoms nationwide.