Texas Anti-ESG Law Ruled Unconstitutional

Federal judge finds law restricting state investments in climate-conscious companies violates free speech rights.

Feb. 5, 2026 at 3:15pm

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A federal judge in Texas has declared unconstitutional a 2021 state law that restricted state investments in companies seeking to rely less on fossil fuels or boycott that industry. The judge ruled the law violated First Amendment free speech protections by punishing businesses for speaking about fossil fuels and associating with organizations that oppose them.

Why it matters

This ruling is a significant victory for sustainable businesses and investors, as it affirms that states cannot legally punish companies for their environmental, social, and governance (ESG) policies. The decision could have broader implications for other states that have passed or are considering similar anti-ESG laws.

The details

U.S. District Judge Alan Albright, an appointee of former President Donald Trump, found that the Texas law known as Senate Bill 13 was 'facially overbroad' and 'unconstitutionally vague,' allowing for discriminatory enforcement. The law was challenged by the American Sustainable Business Council, which argued it illegally codified viewpoint-based discrimination against its more than 250,000 members.

  • The Texas law was passed in 2021.
  • The lawsuit was filed in August 2024.
  • The judge's ruling was made public on February 5, 2026.

The players

Alan Albright

The U.S. District Judge who ruled the Texas anti-ESG law unconstitutional.

American Sustainable Business Council

The organization that challenged the Texas law, representing more than 250,000 sustainable businesses and investors.

Ken Paxton

The Texas Attorney General named as a defendant in the lawsuit.

Glenn Hegar

The former Texas Comptroller named as a defendant in the lawsuit.

Kelly Hancock

The acting successor to the Texas Comptroller, whose office did not immediately respond to requests for comment.

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What they’re 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.”

— David Levine, President and co-founder of the American Sustainable Business Council (Reuters)

What’s next

The Texas Attorney General's office and the acting Texas Comptroller's office have not yet indicated whether they will appeal the judge's ruling.

The takeaway

This court decision is a significant victory for the sustainable business community, affirming that states cannot legally restrict companies from making investment decisions or speaking out based on their environmental, social, and governance (ESG) policies. The ruling could set an important precedent for challenges to similar anti-ESG laws in other states.