A U.S. district court judge last week invalidated Texas Senate Bill 13, a 2021 law restricting state contracts and investments with companies that boycott fossil fuel businesses. U.S. District Judge Alan Albright, of the U.S. District Court for the Western District of Texas, ruled on Feb. 4, 2026, that the law violates the First and Fourteenth Amendments and is unconstitutional and unenforceable.
SB 13 prohibited state agencies and public investment funds from entering into contracts with or investing in companies that refuse to do business with fossil fuel firms. The law also directed the Texas comptroller to maintain a public list of companies deemed to be boycotting the fossil fuel industry.
In a 12-page summary judgment order, Albright said the statute’s definition of boycotting was overly broad and not susceptible to objective measurement. He wrote that the law permitted the state to penalize companies for free speech related to fossil fuels and raised due process concerns.
The ruling limits how far states can go in using contracting and investment decisions to influence corporate positions on climate and energy policy. Texas SB 13 was one of the most prominent state-level laws opposing environmental, social, and governance (ESG) investing, a framework that considers nonfinancial risks such as climate exposure.
The decision also affects public pension funds. After SB 13 took effect, large Texas investment funds, including the Teacher Retirement System of Texas, withdrew billions of dollars from financial firms. The court found the law’s enforcement had already resulted in discriminatory effects.
Acting Texas Comptroller Kelly Hancock (R) said the state would appeal, saying Texas has authority to protect its energy industry and prevent investment firms from using public funds to advance political agendas.
Republican lawmakers passed SB 13 amid broader opposition to ESG investing, particularly among Republican-controlled states. Supporters said the law would protect Texas’ oil and gas industry from financial discrimination.
The American Sustainable Business Coalition filed suit in 2024 against then-Texas Comptroller Glenn Hegar (R) and Attorney General Ken Paxton (R), alleging violations of free speech and due process. The coalition sought summary judgment on several claims in January 2025, which Albright granted last week.
Ballotpedia tracks support for and opposition to the environmental, social, and corporate governance (ESG) investing movement. To learn more about arguments for, against, and about ESG, click here. For more information on reform proposals related to ESG policy, click here.
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