Austin, Texas, February 6, 2026
A federal judge has struck down a 2021 Texas law that prohibited state investments in firms boycotting fossil fuel companies. The ruling declared the law unconstitutional, citing violations of free speech and due process rights. This decision could open doors for sustainable businesses by allowing greater investment freedom without political interference, potentially leading to increased capital flow into the private sector.
Texas Law Barring State Investment in Firms Boycotting Fossil Fuels Declared Unconstitutional
AUSTIN, Texas — A federal district judge has declared a 2021 Texas law, Senate Bill 13, unconstitutional, ruling that it violates the First and Fourteenth Amendments. The law, enacted to prevent state investments in companies that “boycott” the fossil fuel industry, was deemed “facially overbroad” and “unconstitutionally vague.”
Details of the Ruling
U.S. District Judge Alan Albright issued the summary judgment, stating that the law’s definition of “boycotting” was too broad and undermined free speech protections. He noted that the law had already led to “discriminatory enforcement,” with significant state investment funds, including the Teacher Retirement System of Texas and the Texas Permanent School Fund, divesting billions from firms.
Background on Senate Bill 13
Senate Bill 13, commonly referred to as an “anti-ESG” law, was passed in 2021 to discourage divestment from oil and gas companies. The law required the Texas Comptroller’s office to maintain a list of financial firms that refuse, terminate, or penalize business with fossil fuel companies “without ordinary business purpose.” Companies on this list faced divestment from state funds and were restricted from doing business with state entities.
Implications of the Decision
The ruling is seen as a significant victory for sustainable businesses and investors. It affirms the right of businesses to make investment decisions without political interference, potentially allowing for greater capital flow into the private sector. The Texas Comptroller’s Office and Attorney General’s Office have not yet responded to requests for comment on the ruling.
Key Features of the Ruling
| Feature | Description |
|---|---|
| Law Declared Unconstitutional | Senate Bill 13, which restricted state investments in companies boycotting fossil fuels, was ruled unconstitutional by U.S. District Judge Alan Albright. |
| First and Fourteenth Amendment Violations | The law was found to violate free speech and due process protections under the First and Fourteenth Amendments. |
| Discriminatory Enforcement | The ruling highlighted that the law led to discriminatory enforcement, with state investment funds divesting billions from firms. |
| Impact on Sustainable Businesses | The decision is seen as a victory for sustainable businesses and investors, affirming their right to make investment decisions without political interference. |
Frequently Asked Questions (FAQ)
What is Senate Bill 13?
Senate Bill 13, enacted in 2021, was a Texas law that prohibited state agencies from investing in or contracting with companies that “boycott” the fossil fuel industry. The law aimed to prevent state funds from being used to support firms that divested from or limited business with fossil fuel companies.
Why was Senate Bill 13 declared unconstitutional?
U.S. District Judge Alan Albright ruled that Senate Bill 13 was unconstitutional because its definition of “boycotting” was too broad and vague, violating the First and Fourteenth Amendments. The law was found to be “facially overbroad” and “unconstitutionally vague,” leading to “discriminatory enforcement” against companies.
What are the implications of this ruling?
The ruling is considered a significant victory for sustainable businesses and investors, affirming their right to make investment decisions without political interference. It also prevents the state from enforcing a law that could penalize companies for their investment choices related to fossil fuels.
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