Texas Climate Investing Blacklist Stays on Ice

17 April 2026

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By Sarah Wilson

A Texas federal judge has refused to let the state revive its anti-ESG investment law while its Fifth Circuit appeal plays out, handing sustainable-investing firms and their asset-owner clients a second major win in just over two months.[1][2]

In an order issued April 15, U.S. District Judge Alan D. Albright denied Texas’s motion to stay the February 4 injunction against Senate Bill 13, the 2021 statute that barred state pension funds and government entities from investing in, or contracting with, companies the comptroller identified as allegedly boycotting fossil fuel producers. The judge concluded the state had not shown a likelihood of success on appeal, nor a public interest strong enough to justify resurrecting a law he had already found both facially overbroad and impermissibly vague. SB 13’s language, he reasoned, clearly intends to disfavor groups with certain viewpoints and is unlikely to survive Fifth Circuit review.

The ruling, in American Sustainable Business Council v. Hegar (W.D. Tex. 1:24-cv-01010),[3] leaves Texas unable to enforce its divestment blacklist while the appeal proceeds. By the time SB 13 was struck down, the comptroller’s office had identified more than a dozen financial companies and roughly 332 investment funds that triggered the statute’s divestment and contracting prohibitions for state entities.[4] BlackRock, having exited two major climate initiatives, was removed from the company list in June 2025. State pension systems, including the Teacher Retirement System of Texas and the Texas Permanent School Fund, had already sold off billions in holdings to comply.[5]

Texas argued a stay was warranted because SB 13 regulates only commercial conduct, namely the state’s own choices about where to place public dollars, and not protected expression.[6] Albright was unpersuaded. Returning to the reasoning from his February summary judgment ruling, the judge found that the statute’s definition of “boycott” sweeps in exactly the kind of advocacy, speech and association the First Amendment protects. As he put it in the underlying decision, the phrase “taking any action that is intended to penalize” fossil fuel companies ostensibly encompasses constitutionally protected speech, including advocacy against reliance on fossil fuels and association with groups that share similar views.[7] That viewpoint-discriminatory thrust, he reiterated this week, makes reversal on appeal unlikely.

The stay order lands squarely on the “government speech” and subsidy defenses that have become the standard playbook for anti-ESG laws in Republican-led states. Texas, backed on appeal by friends of the court including the Liberty Justice Center, contends that states have broad discretion to decide what activity their taxpayers will underwrite and that declining to subsidise ESG-aligned firms is not the same as punishing them. Albright’s view is that SB 13 goes further: by deploying a vague “boycott” label to blacklist firms for their climate positions, the statute penalises viewpoint itself.

The implications reach well beyond Texas. SB 13 became a template for similar laws in Oklahoma, Missouri, West Virginia, Kentucky and other states. Those copies are already falling. A federal court permanently enjoined Missouri’s broker-dealer ESG-disclosure rules in August 2024,[8] and just last week the Oklahoma Supreme Court struck down that state’s Energy Discrimination Elimination Act as applied to the Oklahoma Public Employees Retirement System.[9] For investors, the pattern is clear: the legal ground beneath state-level anti-ESG mandates is eroding; a Fifth Circuit loss for Texas would accelerate the trend.

The timeline matters for portfolio positioning. Fully briefed constitutional challenges at the Fifth Circuit typically take 12 to 15 months,[10] pointing to a panel decision in early to mid-2027. If the losing side seeks Supreme Court review, final resolution could slip into the 2028 presidential election year. That means prolonged uncertainty for managers weighing ESG-integration strategies in states that copied the Texas model.

For now, sustainable-investing firms previously shut out of Texas public-pension business, including Etho Capital and Sphere, can compete on equal footing.[11] Acting Comptroller Kelly Hancock cannot update or act on the list pending further order.

Texas is expected to seek a stay from the Fifth Circuit itself. Until it does, SB 13 stays on ice.

Anti-ESG and Proxy Adviser Litigation Tracker

The Texas SB 13 ruling sits within a broader pattern of courtroom defeats for the anti-ESG legislative movement. Since 2023, Republican-led states have pushed more than a dozen laws and regulations aimed at punishing financial firms for considering climate and sustainability factors, from fossil-fuel divestment blacklists to compelled-disclosure regimes for broker-dealers and proxy advisers. In nearly every case that has reached a merits decision, federal and state courts have struck the measures down on the same grounds: First Amendment violations (compelled speech, viewpoint discrimination), unconstitutional vagueness, and federal preemption. The few actions that have survived, notably the multistate antitrust suit against BlackRock, State Street and Vanguard, remain in early-stage litigation, and even there Vanguard chose to settle rather than fight. Where the federal government has joined the effort, the results have been no more durable; the Trump administration’s SEC abandoned its own Climate Disclosure Rule, and its Department of Labor withdrew its defence of the Biden-era ESG investing rule that courts had already upheld.

The table below tracks the ten most significant cases. Two themes stand out. First, the legal vulnerabilities are structural, not case-specific: the model legislation that Texas pioneered relies on terms such as “boycott,” “nonfinancial objective” and “ESG” that courts have repeatedly found too vague to enforce and too viewpoint-laden to survive First Amendment scrutiny. Second, even victories for the anti-ESG side have been narrow. In the sole trial to reach judgment, Spence v. American Airlines, the court found a breach of fiduciary loyalty but awarded zero damages and confined its relief to proxy-voting practices rather than ESG investing itself. For investors and asset managers navigating this landscape, the key takeaway is that at a failure rate of between 70-87%, state-level anti-ESG mandates face an increasingly hostile judiciary, and firms that were forced to exit public-pension business or restructure products in response to these laws are, one by one, regaining their footing.

Case	Jurisdiction	Filed	Core Challenge	Current Status
SIFMA v. Ashcroft (Mo.  Anti-ESG Rules)	W.D. Mo.	Aug. 2023	Missouri rules requiring written consent before incorporating ESG objectives. SIFMA argued federal preemption, First Amendment, vagueness.	Permanently enjoined (Aug. 2024). Preempted by NSMIA/ERISA, violated First Amendment, unconstitutionally vague. No appeal.
Keenan v. Russ (Okla. EDEA)	Okla. S. Ct.	Nov. 2023	Retiree challenged Oklahoma’s EDEA requiring divestment from firms “boycotting” fossil fuels.	Struck down (Apr. 2026). EDEA unconstitutional as applied to OPERS; conflicted with constitutional mandate for exclusive-benefit pension administration.
ASBC v. Hegar (Texas SB 13)	W.D. Tex.	2024	Challenge to Texas’s law barring state pensions from investing with companies identified as boycotting fossil fuels. Overbroad, vague, viewpoint-discriminatory.	Injunction upheld (Apr. 2026). Stay denied; on appeal to Fifth Circuit. Panel decision expected early-to-mid 2027.
Spence v. American Airlines	N.D. Tex.	2023	Pilot alleged AA breached ERISA loyalty duty by failing to monitor BlackRock’s proxy voting in non-ESG index funds for potential ESG-related conflicts of interest.	Breach of loyalty found; zero damages (Sept. 2025). Court ruled AA failed to monitor for conflicts, not that proxy votes actually harmed plan returns. Equitable relief only: AA must tie proxy votes to financial materiality; independent EBC member required. Voting on ESG-related proposals remains permissible when pecuniarily motivated.
ISS v. SEC (Proxy “Solicitation”)	D.C. Cir.	2022	ISS challenged SEC’s 2020 rule classifying proxy voting advice as a “solicitation” under the Exchange Act.	ISS won (July 2025). D.C. Circuit held proxy advice is not solicitation; SEC’s 2020 rule invalidated.
ISS & Glass Lewis v. Texas (SB 2337)	W.D. Tex.	July 2025	Proxy advisers challenged Texas law requiring ESG-related disclosures and disclaimers on proxy recommendations.	Preliminarily enjoined (Aug. 2025). Court found likely viewpoint discrimination / compelled speech. Merits litigation continues.
Texas v. BlackRock et al. (Antitrust)	E.D. Tex.	Nov. 2024	Texas + 10 states allege Big Three asset managers conspired to suppress coal production via coordinated ESG engagement.	Vanguard settled ($29.5M, Feb. 2026). Case continues v. BlackRock & State Street; motion to dismiss denied (Aug. 2025). In discovery.
Utah et al. v. DOL (ERISA “ESG Rule”)	N.D. Tex. / 5th Cir.	2023	26 Republican AGs challenged DOL’s rule permitting ESG as a tiebreaker for equivalent investment options.	Rule upheld on remand (Feb. 2025). But Trump DOL withdrew defence (July 2025) and plans to rescind or modify via new rulemaking.
SEC Climate Disclosure Rule	8th Cir.	2024	Multiple challenges to SEC’s 2024 mandatory climate-risk disclosure rule.	In abeyance (Sept. 2025). Trump SEC abandoned defence, calling it “costly and intrusive.” Effectively dead.
California SB 253 / SB 261	9th Cir.	2024	Industry groups challenged California’s GHG emissions (SB 253) and climate risk (SB 261) disclosure laws.	Mixed (2025). SB 261 frozen; SB 253 proceeding. Oral arguments Jan. 2026; panel decision pending.

 

[1]Order on Motion to Stay, American Sustainable Business Council v. Hegar, No. 1:24-cv-01010, ECF No. 59 (W.D. Tex. Apr. 15, 2026), available via CourtListener, https://www.courtlistener.com/docket/69110171/american-sustainable-business-council-v-hegar/.

[2]Ayden Runnels, Federal judge rules Texas fossil fuel boycott law is unconstitutional, The Texas Tribune (Feb. 4, 2026), https://www.texastribune.org/2026/02/04/texas-investment-divest-boycott-fossil-fuels-lawsuit-ruling-esg/.

[3]Docket, American Sustainable Business Council v. Hegar, No. 1:24-cv-01010 (W.D. Tex.), CourtListener, https://www.courtlistener.com/docket/69110171/american-sustainable-business-council-v-hegar/.

[4]Texas Comptroller of Public Accounts, Texas Comptroller Glenn Hegar Announces Update to List of Financial Companies that Boycott Energy Companies (June 3, 2025), https://comptroller.texas.gov/about/media-center/news/20250603-texas-comptroller-glenn-hegar-announces-update-to-list-of-financial-companies-that-boycott-energy-companies-1746731924320.

[5]Federal judge blocks Texas law targeting critics of fossil fuels, Texarkana Gazette / AP (Feb. 12, 2026), https://www.texarkanagazette.com/news/2026/feb/12/federal-judge-blocks-texas-law-targeting-critics/.

[6]Liberty Justice Center, American Sustainable Business Council v. Hegar (amicus brief summary, Mar. 2026), https://libertyjusticecenter.substack.com/p/american-sustainable-business-council.

[7]Texas Judge Strikes Down Anti-ESG “Boycott” Law, Harvard Law School Forum on Corporate Governance (Mar. 1, 2026), https://corpgov.law.harvard.edu/2026/03/01/texas-judge-strikes-down-anti-esg-boycott-law/.

[8]SIFMA, Court Strikes Down Missouri Rules That Violate Federal Law and Grants Statewide Permanent Injunction (press release, Aug. 14, 2024), https://www.sifma.org/resources/news/court-strikes-down-missouri-rules-that-violate-federal-law-and-grants-statewide-permanent-injunction/.

[9]Tres Savage, OK Supreme Court finds Energy Discrimination Elimination Act unconstitutional as applied to OPERS, NonDoc (Apr. 7, 2026), https://nondoc.com/2026/04/07/ok-supreme-court-finds-energy-discrimination-elimination-act-unconstitutional-as-applied-to-opers/.

[10]Practitioners’ Guide to the United States Court of Appeals for the Fifth Circuit (2024 ed.), at 5, https://www.ca5.uscourts.gov/docs/default-source/forms-and-documents—clerks-office/documents/practitionersguide.pdf.

[11]Texas Anti-ESG Law Blocked by Federal Judge, Texas Scorecard (Feb. 2026), https://texasscorecard.com/state/texas-anti-esg-law-blocked-by-federal-judge/.

 

Last Updated: 17 April 2026