Business Group Files Challenge to Texas Law That Punishes Responsible Investors

ASBN in the News

AUSTIN – Today, the American Sustainable Business Council (ASBC), acting on behalf of members including Etho Capital and Sphere, sued Texas for violating the free speech and association rights protected under the First and Fourteenth Amendments of the United States Constitution through the implementation of SB-13—a law that penalizes private companies that choose not to make risky investments in fossil fuel companies.

SB-13 prohibits state investments and contracts with companies that advocate for reductions in reliance on fossil fuels. The lawsuit filed in the Western District of Texas’ Austin Division argues that SB-13 discriminates against companies that use environmental, social, and governance (“ESG”) metrics in their investing and business practices. The law, moreover, has both a negative impact on businesses that use ESG metrics and on everyday Texans. The lawsuit highlights the substantial financial harms SB-13 has had on Texas taxpayers, workers, business owners, and pensioners.

“SB-13 is not just a misguided policy; it is an unconstitutional attack that stifles free speech and punishes businesses for prioritizing responsible investments,” said David Levine, President and Cofounder at the American Sustainable Business Council (ASBC). “By challenging SB-13, we aim to protect the rights of all businesses to operate freely and responsibly.”

“Laws like SB-13 not only inhibit economic growth and innovation, but also set a dangerous precedent for the role of government in business affairs,” said Amberjae Freeman, Chief Executive Officer at Etho Capital. “Etho Capital believes that responsible investing is not just good for the environment, but also for long-term economic growth. SB-13’s shortsightedness is costing Texans millions and hindering progress towards a more resilient and inclusive economy. It’s time to put an end to this detrimental law.”

“We founded Sphere to help people saving for retirement protect themselves from climate risk,” commented Alexandra Wright-Gladstein, Founder and CEO at Sphere. “The Texas law is intended to limit our ability to offer investment options, but really harms Texas in the process.”

The businesses are being represented by Democracy Forward, a national legal organization that promotes democracy and progress, Emery Celli Abady Brinckerhoff Ward & Maazel LLP, and Guerrero & Whittle PLLC.

“Governor Abbott should have never signed SB-13. The law is bad for Texas businesses and taxpayers, and violates the U.S. Constitution,” said Skye Perryman, President and CEO at Democracy Forward. “It is past time for Governor Abbott, Lt Governor Patrick, and their associates in the Texas legislature to prioritize the wellbeing of people in the state. Texas businesses, taxpayers, workers, and public employees will be better off if SB-13 is struck down.”

The case is ASBC v. Hegar and plaintiffs are requesting a federal court to declare SB-13 unconstitutional and unenforceable.

To request an interview with a Democracy Forward spokesperson or one of the parties to the suit, please email dgrahamcaso@democracyforward.org. For more information about our work, please visit www.democracyforward.org.

Contact: David Graham-Caso, dgrahamcaso@democracyforward.org

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About American Sustainable Business Council (ASBC)
American Sustainable Business Council (ASBC) is a movement builder in partnership with the business and investor community. ASBC develops and advocates solutions for policymakers, business leaders, and investors that support an equitable, regenerative, and just economy that benefits all⁠—people and planet.

About Etho Capital
Etho Capital® is a financial technology company on a mission to align investor profits with a better planet. It aims to build the world’s most sustainable investment strategies that achieve superior financial performance through true sustainability, climate science, and positive social impacts for a just economy.

About Sphere
Sphere is on a mission to help green your retirement investments. That’s why Sphere offers a climate-friendly investment option that is truly fossil-free, and that can be added to 401(k) platforms.

About Democracy Forward Democracy Forward
is a national legal organization that advances democracy and social progress through litigation, policy and public education, and regulatory engagement.