Texas officials and investors have been left without a key divestment deterrent after a federal judge struck down a 2021 law that aimed to limit state money tied to companies the state characterized as “boycotting” fossil fuel firms. In a summary judgment issued Wednesday, U.S. District Judge Alan Albright ruled that the statute violates constitutional protections, including free speech concerns raised under the First and Fourteenth Amendments.
Albright’s decision focused on how Senate Bill 13 defines “boycotting.” In the 12-page order, he wrote that the law’s “boycotting” definition is comprised of three clauses, adding that each clause is undefined and “not susceptible to objective measurement or determination.” The judge also found that the law had already led to “discriminatory enforcement” of its provisions.
The lawsuit and the ruling centered on how Texas tried to translate its investment policy into a test of corporate behavior. Senate Bill 13 required the Texas comptroller’s office to maintain a list of financial firms that refuse, terminate or penalize business with a fossil fuel company “without ordinary business purpose.” Texas lawmakers passed the bill in 2021 as a means of discouraging divestment from oil and gas companies.
The case also described how the law’s implementation affected large investment managers. After the bill passed, huge state investment funds, including the Teacher Retirement System of Texas and the Texas Permanent School Fund, divested billions from firms. The Texas Comptroller’s office maintained a public list of more than 300 companies that it identified as boycotting energy companies, and that list was last updated in June.
During the June update, the comptroller removed BlackRock, one of the largest international investment firms, after it excused itself from two major climate initiatives, according to the account in the ruling. The then-state comptroller, Glenn Hegar, had praised the removal as a “meaningful victory” for Texas’ economy.
The legal fight began when the American Sustainable Business Coalition filed the suit in 2024 against Texas Comptroller Glenn Hegar and Attorney General Ken Paxton. The coalition alleged five counts tied to free speech and due process. In January 2025, the coalition moved for summary judgment on three of those claims, and Albright ruled in favor of the coalition on all three Wednesday.
David Levine, president and co-founder of the American Sustainable Business Coalition, said in a statement that SB 13 had already cost the state “hundreds of millions of dollars.” Levine also called the decision a “massive win” for sustainable businesses, saying: “The court has affirmed what we’ve always known: you cannot punish businesses for their investment decisions or silence those who speak about climate risk,” according to the statement included in the reporting.
Texas’s Comptroller’s Office and the Attorney General’s Office did not immediately respond to a request for comment about the ruling, the report said. Supporters of the coalition’s challenge also framed the decision as a victory for retirement beneficiaries, with Tim Hill, president of the Alliance for Prosperity and a Secure Retirement, saying the ruling would help “keep politics out of public finance” and put a stop to what he called an effort in Texas to include non-fiduciary issues in how public pension funds are invested.