Free Speech at Risk: A nonprofit organization argues that Texas' anti-ESG law infringes on constitutional rights.

Financial Consequences: The law targets businesses perceived to be boycotting the oil and gas industry, impacting investments and contracts.

State's Position: Texas officials defend the legislation, claiming it upholds state values and protects economic interests.

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

Senate Bill 13, passed in 2021, prevents Texas from engaging with companies that the state perceives as "boycotting" the oil and gas industry. The ASBC contends that this law violates free speech rights by penalizing businesses based on their environmental, social, and governance (ESG) positions.

Texas Comptroller Glenn Hegar, one of the defendants, defended the law, calling the lawsuit "a frivolous attempt to force Texas and its taxpayers to invest in ways that contradict their values and harm their economic well-being." Hegar has previously identified companies like NatWest and BlackRock, whose ESG policies he believes unfairly target the fossil fuel sector.

The ASBC, which represents over 200,000 businesses, claims that the law has harmed its members, including firms like Etho Capital and Our Sphere, both on Hegar's list. The nonprofit asserts that Senate Bill 13 "violates the First Amendment by preventing companies from competing for state investments or contracts based on a viewpoint the state disfavors regarding fossil fuels." The lawsuit argues that "because SB 13 codifies viewpoint-based discrimination, it is presumptively unconstitutional."

The case, American Sustainable Business Council v. Hegar et al, will be heard in the U.S. District Court for the Western District of Texas. Texas Attorney General Ken Paxton, also named in the lawsuit, has yet to comment on the case. The outcome could have significant implications for state laws regulating ESG policies and corporate freedoms across the country.