A coalition of progressive business organizations is suing Texas over a 2021 law that blocks the state from investing in and contracting with companies that boycott the fossil fuel industry.
The suit, filed in federal court in Austin on Thursday by the American Sustainable Business Council, argues that the law infringes on the companies’ free speech and association rights and does not allow banned companies due process. The law, it argues, constitutes viewpoint-based discrimination that allows the Texas comptroller to punish speech he dislikes. Texas Comptroller Glenn Hegar and Attorney General Ken Paxton are named as defendants.
“Among ASBC’s many projects are efforts to encourage sustainable investing and sustainable business practices,” lawyers for the council write in the suit. “These are all cornerstones of the modern Texas economy. Yet, SB 13 takes aim at, and punishes, companies that speak about, aspire to, and achieve this goal.”
Republicans pushing SB 13 contended that doing business with companies that boycott fossil fuel-based energy companies has a negative effect on the Texas economy.
“S.B. 13 seeks to ensure that taxpayer dollars are not being used to promote an agenda that hurts the state’s energy sector and economy as a whole by prohibiting investments by certain state entities in companies that boycott these energy companies,” the bill analysis reads.
As of this month, there are almost 370 businesses and investment funds, including Blackrock, Inc and HSCBC Holdings, PLC, that the comptroller’s office has blacklisted for their boycotts of the oil and gas industries.
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In Thursday’s suit, the business council argues that SB 13 forces members “to choose between their First Amendment rights and their ability to compete for investments from and contracts with” the state. It also argues the law is written so vaguely that council members can’t determine whether their actions or expressions constitute a boycott.
SB 13 is similar to a 2017 law that blocks state investments and certain contracts with companies that boycott Israel. In 2019, after a federal judge blocked enforcement of the law, finding that it would violate the First Amendment, lawmakers narrowed the law to exclude small businesses and small contracts.
See here for some background. Remember when Mitt Romney was out there saying that corporations are people? If they are, then they have First Amendment rights, and so here we are. Chron business columnist Chris Tomlinson adds on.
The complaint filed in Austin on Thursday argues that 2021’s Senate Bill 13 was designed to boost investment in fossil fuel companies and violates businesses’ First Amendment prohibition against discrimination based on viewpoint and the 14th Amendment right to due process.
The council, representing thousands of businesses and investors, filed the suit on behalf of financial technology firms Etho Capital and Sphere, which prioritize environmentally responsible investing. The blacklist prohibits them from expanding business in Texas.
“Laws like SB 13 not only inhibit economic growth and innovation but also set a dangerous precedent for the role of government in business affairs,” Etho Capital CEO Amberjae Freeman said. “Etho Capital believes that responsible investing is not just good for the environment but also for long-term economic growth.”
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Hegar has placed dozens of investment funds and 16 large firms on the list, including the world’s largest asset manager, BlackRock, along with HSBC, UBS, BNP Paribas, NatWest Group and AMP Limited. Etho Capital’s Climate Leadership ETF and Sphere’s 500 Fossil Free Fund are on the list of banned securities.
BlackRock, UBS and other companies have protested their inclusion, pointing to tens of billions of dollars invested in the oil and gas industry. But Lt. Gov. Dan Patrick and Hegar insisted on their inclusion without explaining why or how they might get off it. Thus, the complaint about due process.
“SB 13 is not just a misguided policy; it is an unconstitutional attack that stifles free speech and punishes businesses for prioritizing responsible investments,” David Levine, president and cofounder of the council, said. “By challenging SB 13, we aim to protect the rights of all businesses to operate freely and responsibly.”
Democracy Forward, a national legal organization that defends civil rights, represents the firms.
Banning major financial firms gives local governments fewer choices for bond offerings, loans and other financial services. Larger firms tend to offer better terms. TXP, an economic analysis firm hired by the Texas Association of Business Chambers of Commerce Foundation, calculated that SB 13 costs Texans $270 million a year in debt-related costs alone.
SB 13 is only one example of a nationwide movement to force corporations to do business with fossil fuel companies. Dozens of state legislatures have passed laws blacklisting companies for implementing environmental, social and governance safeguards. Courts have already stopped Oklahoma and Missouri from imposing similar statutes.
I’m old enough to remember when Republicans thought it was a bad idea for the government to “pick winners and losers” in business. Those were the days. I’m a little surprised that it’s taken this long for a lawsuit like this to be filed, but better late than never. As with most litigation these days, I don’t have much optimism once it gets to the appellate level. We’ll see. The Trib and Bloomberg Law have more.