A recent lawsuit has been filed by the American Sustainable Business Council against Texas Comptroller Glenn Hegar and Attorney General Ken Paxton. The lawsuit challenges the constitutionality of a 2021 Texas law that penalizes financial firms for “boycotting” the fossil fuel industry. The plaintiffs argue that the law infringes on their free speech and association rights as protected by the First and Fourteenth Amendments of the U.S. Constitution.
The lawsuit follows a similar case in Oklahoma where enforcement of an anti-boycott law was halted in July due to it violating the state’s constitution. Texas has been a pioneer in implementing laws targeting environmental, social, and governance issues, leading to the blacklisting of 19 financial firms for activities deemed as “boycotting” or “discriminating” against certain industries.
The laws in question, including Senate Bill 13, have resulted in divestment of public assets and restrictions on governmental contracts with banned firms. This has led to negative consequences for business operations, as noted by the Texas Association of Business study showing reduced competition in the municipal bond market for Texas debt, ultimately increasing interest costs and financial burdens for local governments and taxpayers.
Texas Comptroller Glenn Hegar defended the law, stating that it ensures transparency and aligns with the state’s values. He criticized the lawsuit as an attempt to impose a radical environmental agenda on businesses and force them to prioritize politics over financial sustainability. Attorney General Ken Paxton also took action by banning Barclays from underwriting debt, further emphasizing the state’s commitment to enforcing the anti-boycott measures.
The lawsuit highlights the challenges faced by businesses like Etho Capital and Our Sphere, whose flagship investment funds were blacklisted by the Texas comptroller. By targeting financial firms engaged in “boycotting” practices, the law has created uncertainty and restrictions within the industry, hindering responsible investment practices and imposing penalties on companies that prioritize ethical considerations.
The legal battle against Texas’ anti-boycott law sheds light on the complex intersection of business, policy, and constitutional rights. As the case unfolds in federal court, the outcome will have far-reaching implications for the financial industry and the broader landscape of corporate social responsibility. It is essential for stakeholders to engage in constructive dialogue and advocacy to balance regulatory measures with the protection of fundamental freedoms.