We’ve previously written about the Texas Anti-ESG investing law that established a list of financial services firms excluded from providing certain investment and underwriting services under state contracts because the firms offer ESG products or use ESG factors in investment decisions. Since the law was introduced in 2021, commenters have questioned its constitutionality. Now The American Sustainable Business Council brings those concerns to court. Responsible Investor describes the suit stating:
“The lawsuit, filed in a federal court in Austin, claims that the Texas law violates the First Amendment right to free speech by ‘impermissibly infringing rights of free speech and association under a scheme of politicised viewpoint discrimination based on no legitimate state interest’. It also claims that key terms related to compliance are ‘undefined and vague’ and that the law does not provide blacklisted entities with a meaningful opportunity to contest their place.”
The arguments may spill over into other states with similar anti-ESG investing laws like West Virginia and Kentucky. So far, anti-ESG investing laws have had the most impact of any tool in anti-ESG’s toolbox, despite threats of litigation and investigations into financial services firms’ ESG policies. If the courts find the Texas law unconstitutional the movement could lose its strongest advantage. We can only wait and see if this cools off anti-ESG or causes a doubling down in other states.
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