Texas is being sued over anti-ESG law by Reuters

By Jonathan Stempel

(Reuters) – Texas was sued on Thursday by a nonprofit organization whose members support green policies and is trying to block a state law targeting businesses that advocate reduced reliance on fossil fuels.

The American Council on Sustainable Business said the 2021 bill known as Senate Bill 13 violates members’ free speech rights, prohibiting Texas from investing in or contracting with businesses that the state believes are “boycotting” the oil industry and gases.

Texas is the largest and among the most prominent Republican-led states that have cracked down on businesses whose environmental, social and governance (ESG) policies they don’t like. It is also easily the largest oil producing state in the US.

State Attorney General Ken Paxton and Comptroller Glenn Hegar, both Republicans who support the 2021 law, were named as defendants in the lawsuit filed in federal court in Austin, Texas.

Representatives from their offices did not immediately respond to requests for comment.

In connection with the 2021 law, Hegar maintains a list of 16 financial companies and more than 350 investment funds whose ESG policies it believes impermissibly target fossil fuel energy.

Hegar added UK bank NatWest to the list two weeks ago. In March, the Texas Permanent School Fund said it would take $8.5 billion in assets under management from BlackRock (NYSE: ), which is also on the receivership list.

The American Council on Sustainable Business said Senate Bill 13 hurt its corporate and individual members, who represent more than 200,000 businesses, despite Texas’ self-promotion as a business-friendly state.

Two members, Etho Capital and Our Sphere, have funds on Hegar’s list.

“The law violates the First Amendment by prohibiting companies from competing for state investment or contracting with the state whenever Texas believes those companies support a disfavored view of fossil fuels,” the complaint says. “Because SB 13 codifies viewpoint discrimination, it is presumptively unconstitutional.”

The case is American Sustainable Business Council v. Hegar et al, US District Court, Western District of Texas, No. 24-01010.