Texas Attorney General Ken Paxton (R) announced his office is investigating Institutional Shareholder Services (ISS) and Glass Lewis, the two largest proxy advisory firms, for “potentially misleading institutional investors and public companies by issuing voting recommendations that advance radical political agendas.” The announcement followed a U.S. district court injunction pausing the state’s new law regulating proxy advisors.
Why does it matter?
Proxy advisory firms advise institutional investors on how to vote on corporate proposals and board elections. The Texas probe is part of a wider Republican focus on ESG, extending attention beyond asset managers and banks to proxy advisory firms.
What’s the background?
Together, ISS and Glass Lewis control more than 95% of the proxy advisory market. In recent years, Republican officials in Texas and other states have taken steps to limit the influence of ESG considerations in financial decision-making, including proxy voting.
Texas Senate Bill 2337, signed into law in June 2025, requires proxy advisory firms to disclose when their recommendations are based on nonfinancial factors, such as ESG or diversity policies, and to provide additional justification when recommendations diverge from company management. Supporters say the law will protect shareholders from politicized advice, while opponents say it restricts proxy advisors’ independence and imposes new compliance burdens.
On July 24, ISS and Glass Lewis filed separate lawsuits in the U.S. District Court for the Western District of Texas. They allege the new Texas law is unconstitutionally vague, compels speech—violating the First Amendment, and also conflicts with federal pension law. On Aug. 29, Judge Alan Albright issued preliminary injunctions pausing enforcement of SB 2337 while the cases proceed.
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