A Texas law requiring state entities to sever ties with financial companies that 'boycott fossil fuels' has been blocked by a district judge.
A Texas law requiring state entities to sever ties with financial companies that "boycott fossil fuels" has been blocked by a district judge.The judge decided Senate Bill 13, which prompted an $8.5 billion hit to BlackRock, violates two amendments to the U.
S. Constitution. U.S. District Judge Alan D. Albright ordered Tuesday that the State of Texas is enjoined from implementing and enforcing SB 13, which blocked state contracts with companies that were believed to be harmful to the fossil fuel industry. Albright found that the law violates the 1st and 14th Amendments, saying the law was overly broad, unconstitutionally vague, and enables arbitrary and discriminatory enforcement. Albright's order says companies could lose state contracts under SB 13 simply for criticizing fossil fuels or associating with "sustainability-focused" organizations. He also criticized key terms, such as "limit commercial relations" and "any action," which he said were too open-ended. This prevents companies from knowing what actions might result in penalties, the order says. The order also says businesses have been blacklisted for viewpoints and association rather than action, with Albright suggesting there's been a lack of clear standards under the law. Read the full judicial order below:SB 13 prevented state entitled from investing in companies that refuse to do business with or harm companies in the fossil fuel industry. The law has been referred to as the state's anti-ESG law, referring to environmental, social, and governance regulations. It worked by requiring those state entities to sell stocks in such companies or cancel contracts with them. Companies could get 90-day warnings to end boycotts before losing these investments and contracts, and were required to sign statements saying they wouldn't enter into boycotts during new Texas contracts. The law was enacted to protect the Texas economy's investment in oil and gas, preventing public money from going to companies that might harm those efforts. Critics at the time of the law's passage worried it could hurt companies who were environmentally conscious. Within a year of SB 13 going into effect, Texas named 10 companies as boycotters of the state's energy industry. That list included BlackRock and UBS Group, as reported by FOX Business. BlackRock released a statement soon after, disagreeing with the comptroller at the time:"This is not a fact-based judgment," the statement said. "BlackRock does not boycott fossil fuels – investing over $100 billion in Texas energy companies on behalf of our clients proves that. Elected and appointed public officials have a duty to act in the best interests of the people they serve. Politicizing state pension funds, restricting access to investments, and impacting the financial returns of retirees is not consistent with that duty."Less than two years later, Texas pulled an investment of $8.5 billion with the company.
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