A federal judge has ruled that a Texas law, enacted in 2021, which restricts state investments in companies that boycott the fossil fuel industry, is unconstitutional. U.S. District Judge Alan Albright declared the law, known as SB 13, as “facially overbroad” while citing concerns related to the First and Fourteenth Amendments of the U.S. Constitution. This decision emphasizes significant issues with how the law defines boycotting and its potential for discriminatory enforcement.
The legislation required the Texas Comptroller’s Office to maintain a list of financial firms that either refuse to engage in business with fossil fuel companies or penalize them “without ordinary business purpose.” The law has drawn criticism for its vague definitions and effects on free speech rights, particularly for businesses involved in climate change initiatives.
Judge Albright’s summary judgment, issued on March 15, 2024, highlighted that the law’s definition of what constitutes boycotting is unclear. He noted that the three clauses used to define boycotting are undefined and lack objective measurement. According to Albright, this ambiguity has already led to “discriminatory enforcement” of the law’s provisions.
Since the passage of SB 13, major state investment funds, including the Teacher Retirement System of Texas and the Texas Permanent School Fund, have identified over 300 companies as boycotting energy firms. Notably, BlackRock, a leading global investment firm, was removed from this list following its withdrawal from two significant climate initiatives. This action was previously celebrated by then-Comptroller Glenn Hegar, who called it a “meaningful victory” for Texas’ economy.
The law faced a lawsuit from the American Sustainable Business Council (ASBC), which alleged multiple counts of free speech and due process violations. The ASBC sought a summary judgment on three claims in January 2025, all of which were ruled in their favor by Judge Albright.
In response to the ruling, David Levine, ASBC president and co-founder, stated that SB 13 had cost the state hundreds of millions of dollars, describing the ruling as a “massive win” for sustainable businesses. “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 added.
Supporters of the lawsuit have praised the ruling as beneficial for state employees and retirees. Tim Hill, president of the Alliance for Prosperity and a Secure Retirement, characterized the decision as a victory for current and future retirees in Texas. “Judge Albright’s thoughtful ruling will help keep politics out of public finance,” Hill stated. “We are gratified that today’s ruling puts a stop to the unconstitutional effort in Texas to include non-fiduciary issues when deciding how to invest public pension funds.”
The Texas Comptroller’s Office and the Attorney General’s Office have not yet commented on the ruling. This case underscores the ongoing debate over the intersection of environmental policies and state investment strategies, illustrating the complexities and potential legal ramifications of legislation aimed at addressing climate change.
