By Jonathan Stempel
(Reuters) -Texas was sued on Thursday by a nonprofit group whose members support environmentally friendly policies, seeking to block a state law targeting companies that support reduced reliance on fossil fuels.
The American Sustainable Business Council said the 2021 law, known as Senate Bill 13, violates members’ free speech rights by banning Texas from investing in or contracting with companies that, in the state’s view, are the oil and ‘boycott’ the gas industry.
Texas is the largest and one of the most prominent Republican-led states to crack down on companies that don’t like environmental, social and governance (ESG) policies. It is also by far the largest oil producing state in the US.
The lawsuit, filed in Austin, Texas, named as defendants in federal court: Attorney General Ken Paxton and Comptroller Glenn Hegar, both Republicans who support the 2021 law.
In a statement, Hegar accused the plaintiff of pursuing a “radical environmental agenda” that requires companies to prioritize politics over shareholders.
He called the lawsuit a frivolous attempt to force Texas and its taxpayers to invest “in a way that is contrary to their values and detrimental to their own economic well-being. That is absurd.”
Paxton’s office 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 he believes are impermissibly biased toward fossil fuel energy.
Two weeks ago he added the British bank NatWest to the list. In March, the Texas Permanent School Fund said it would withdraw $8.5 billion in assets under management from BlackRock (NYSE:), which is also on the comptroller’s list.
The American Sustainable Business Council said Senate Bill 13 has hurt its corporate and individual members, who represent more than 200,000 companies, despite Texas portraying itself as a business-friendly state.
Two members, Etho Capital and Our Sphere, have funds listed by Hegar.
“The law violates the First Amendment by prohibiting companies from competing for state investments or contracts with the state when Texas believes those companies espouse unfavorable views on fossil fuels,” the complaint says.
“Because SB 13 codifies viewpoint-based 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.
