A nonprofit group that supports environmental policies filed a lawsuit against the state of Texas on Thursday and is seeking to block a state law that targets businesses that support reducing reliance on fossil fuels.
The American Sustainable Business Council said the 2021 law, Senate Bill 13, which prohibits Texas from investing in or contracting with businesses the state deems “boycott” the oil and gas industry, violates members’ free speech rights.
Texas, one of the largest and most prominent Republican states in the U.S., has cracked down on the environmental, social and governance (ESG) policies of companies it doesn’t like. Texas is also the top oil-producing state in the U.S.
State Attorney General Ken Paxton and Auditor General Glenn Hegar, both Republicans who supported the 2021 law, are named as defendants in the lawsuit filed in federal court in Austin, Texas.
Representatives from his office did not immediately respond to a request for comment.
In response to the 2021 law, Hegar listed a list of 16 financial companies and more than 350 investment funds whose ESG policies he believes do not allow for targeting fossil fuel-based energy.
Two weeks ago, Hegar added Britain’s NatWest Bank to the list. In March, Texas Permanent Schools Fund said it would withdraw $8.5 billion from BlackRock, which was also on the auditor general’s list.
The American Sustainable Business Council said that despite Texas’s self-image as a business-friendly state, Senate Bill 13 has harmed the interests of its corporate and individual members representing more than 200,000 businesses.
Funds from two member firms, Etho Capital and Our Sphere, are on Hegar’s list.
“The law violates the First Amendment by prohibiting companies from competing for state investments or contracting with the state if the state of Texas believes those companies hold unfavorable views toward fossil fuels,” the lawsuit states. “Because SB 13 codifies discrimination based on viewpoint, it is presumptively unconstitutional.”
The case is American Sustainable Business Council v. Hegar et al., U.S. District Court for the Western District of Texas, Case No. 24-01010.