Texas is facing a lawsuit from the American Sustainable Business Council, a nonprofit advocating for environmentally-friendly policies, which seeks to block a state law that targets businesses promoting reduced reliance on fossil fuels. The 2021 law, known as Senate Bill 13, prohibits Texas from investing in or contracting with businesses that, in the state’s view, “boycott” the oil and gas industry, a move the council argues violates its members’ free speech rights.
The lawsuit, filed in Austin’s federal court, names Texas Attorney General Ken Paxton and Comptroller Glenn Hegar, both Republicans who supported the law, as defendants. Texas, the largest oil-producing state and a leading Republican stronghold, has been cracking down on businesses with environmental, social, and governance (ESG) policies it disagrees with.
In response, Hegar accused the council of pushing a “radical environmental agenda” that forces companies to prioritise politics over shareholder interests. He described the lawsuit as a frivolous attempt to compel Texas and its taxpayers to invest in ways contrary to their values and detrimental to their economic well-being. Paxton’s office did not immediately respond to requests for comment.
As part of the 2021 law, Hegar maintains a list of 16 financial companies and over 350 investment funds whose ESG policies he believes inappropriately target fossil fuel-based energy. Recently, he added British bank NatWest to the list. Earlier in March, the Texas Permanent School Fund decided to withdraw $8.5 billion in assets from BlackRock, another company on Hegar’s list.
The American Sustainable Business Council argues that Senate Bill 13 has harmed its members, who represent over 200,000 businesses, despite Texas’s reputation as a business-friendly state. Two members, Etho Capital and Our Sphere, have funds on Hegar’s restricted list.
The complaint asserts that the law violates the First Amendment by preventing companies from competing for state investments or contracts if Texas perceives them as having a disfavored stance on fossil fuels. The council contends that the law codifies viewpoint-based discrimination, making it presumptively unconstitutional.
The case is filed as ‘American Sustainable Business Council v. Hegar et al’, in the U.S. District Court for the Western District of Texas, under case number 24-01010.