A US district judge has blocked a Texas law that required state entities to cut financial ties with companies deemed to be “boycotting” the fossil fuel industry, ruling that the measure violates the US Constitution.
US District Judge Alan D. Albright on Tuesday ordered the State of Texas to halt the implementation and enforcement of Senate Bill 13 (SB 13), finding that the law breaches the First and Fourteenth Amendments.
In his ruling, Albright said SB 13 was overly broad, unconstitutionally vague, and allowed for arbitrary and discriminatory enforcement. The law barred state contracts and investments with companies considered harmful to the fossil fuel sector, a definition the judge said lacked clear standards.
The order noted that companies could lose state contracts simply for criticising fossil fuels or for associating with sustainability-focused organisations. Albright also took issue with key phrases in the law, including “limit commercial relations” and “any action”, describing them as open-ended and failing to give businesses adequate notice of what conduct could trigger penalties.
The judge further found that companies had effectively been blacklisted based on viewpoints and associations rather than concrete actions, raising concerns about the suppression of constitutionally protected speech.
Reacting to the decision, David Levine, president and co-founder of the American Sustainable Business Council, said the ruling marked “a massive win for sustainable businesses and investors”.
“The court has affirmed what we’ve always known: you cannot punish businesses for their investment decisions or silence those who speak about climate risk,” Levine said. He added that SB 13 had cost Texans “hundreds of millions of dollars”, blacklisted responsible businesses and undermined efforts to build a more resilient economy.
Skye Perryman, president and chief executive of Democracy Forward, described SB 13 as “an unconstitutional attack on business that was bad for Texas”.
“The court correctly saw through the state’s contradictory arguments and struck down a law that threatened the freedom to invest and punished speaking about the risks posed by fossil fuels,” Perryman said.
Background to SB 13
SB 13, often described as Texas’s anti-ESG law, prohibited state entities from investing in or contracting with companies that refused to do business with, or were deemed to harm, the fossil fuel industry. It required state bodies to divest from listed companies or cancel contracts, unless firms agreed within 90 days to end any alleged boycotts and sign commitments not to do so in future contracts.
The legislation was introduced to protect Texas’s oil and gas economy by preventing public funds from flowing to companies perceived as hostile to the sector. Critics warned at the time that it would penalise environmentally conscious businesses and politicise investment decisions.
Within a year of SB 13 coming into force, Texas had identified 10 companies as fossil fuel “boycotters”, including BlackRock and UBS Group. BlackRock rejected the designation, stating that it did not boycott fossil fuels and had invested more than $100 billion in Texas energy companies on behalf of clients.
Despite this, Texas later withdrew around $8.5 billion in investments from BlackRock. According to figures cited by Democracy Forward, SB 13 is estimated to have cost the state nearly $700 million in lost economic activity, contributed to the loss of around 3,000 full-time jobs, and increased banking and financial services costs by approximately $270 million.
The ruling represents a significant setback for state-level anti-ESG legislation in the US and could have wider implications for similar laws in other states.
