A federal judge this week ruled that a Texas law designed to block state funds from being invested with financial firms that boycott fossil fuel companies is unconstitutional, delivering a setback to Republican-led efforts to push back against ESG-style investing.
U.S. District Judge Alan Albright, a Trump appointee, determined that Texas Senate Bill 13 violated both the First and 14th Amendments. In a decision published Wednesday, Albright concluded that the law’s reach was too broad and improperly targeted protected speech.
“SB 13’s application to protected speech is ‘substantial,’” Albright wrote, finding that the law crossed constitutional boundaries and was therefore “unconstitutional and unenforceable.”
The judge said the statute went too far by allowing the state to penalize companies for a wide range of expression related to fossil fuels. According to the ruling, the law effectively permitted Texas to punish firms not just for concrete business actions, but for viewpoints and positions that are protected under the Constitution.
The law at issue would have prohibited Texas from investing state funds—including pension funds for teachers and state employees—with financial firms that refuse to do business with fossil fuel companies. Under SB 13, the state comptroller was required to maintain a list of firms deemed hostile to the energy industry and to divest state money from any company that did not abandon its anti–fossil fuel stance.
Texas officials quickly signaled the fight is not over. Acting Texas Comptroller Kelly Hancock said the state plans to appeal the ruling, arguing that Texas has the authority to protect its core industries and the economic interests of its citizens.
“Texas has every right to pass responsible laws that protect our energy industry and prevent investment firms from using Texans’ own money to push political agendas that would undermine our economy,” Hancock said in a written statement.
SB 13 was part of a broader Republican pushback against ESG investing, an approach in which financial firms direct capital toward companies based on environmental, social, and governance considerations. Critics of ESG argue that it injects political ideology into investment decisions and can harm traditional industries such as oil and gas, particularly in energy-producing states like Texas.
Texas is not alone in pursuing such policies. Several other Republican-led states have enacted or considered similar anti-ESG laws, aiming to prevent state funds from being leveraged to advance political or social agendas at odds with their economic priorities.
Supporters of the lawsuit challenging the Texas law applauded the judge’s decision. Camilla Taylor, executive director of the American Sustainable Business Council, which brought the legal challenge, praised the ruling in a blog post.
Taylor argued that businesses and investors should be free to make long-term decisions without government punishment, framing the issue as one of constitutional freedom rather than political ideology. She said companies that focus on long-term thinking are exercising rights protected by the Constitution and should not be penalized for doing so.
“Today is a good day for businesses in Texas. Today is a good day for businesses across America,” Taylor wrote, adding that the ruling could have ripple effects nationwide.
The decision sets the stage for a broader legal battle over the limits of state power in regulating investment practices and resisting ESG-driven financial strategies. With Texas planning to appeal, the case is likely far from settled, and the outcome could shape how far states can go in pushing back against politically charged investment policies.
[READ MORE: Stephen A. Smith and Bill Maher Torch Schumer’s Voter ID Rhetoric, Warn Democrats of Trump Trap]
