A federal district judge on Wednesday declared a 2021 law restricting state investments in companies boycotting the fossil fuel industry unconstitutional, calling it “facially overbroad” and citing First and Fourteenth Amendment concerns.

Legislators passed Senate Bill 13 as a way of discouraging divestment from oil and gas companies, as financial figureheads at the time had signaled they intended to make climate change initiatives a larger factor in their investment considerations. The law requires the 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.” SB 13 is commonly referred to as an “anti-ESG” law, which stands for “environmental, social and governance.”

U.S. District Judge Alan Albright delivered the summary judgment, and affirmed in the 12-page order that the way SB 13 determined what constituted boycotting a company was too broad and undermined free speech protections of firms affected.

“SB 13’s ‘boycotting’ definition is comprised of three clauses, all of which are undefined and not susceptible to objective measurement or determination,” Albright wrote in the ruling.

Albright also wrote that the law had already led to “discriminatory enforcement” of its provisions. After SB 13 was 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 maintains a publicly available list of more than 300 companies they identified as boycotting energy companies, which was last updated in June. During that update, BlackRock, one of the largest international investment firms, was removed from the list after it excused itself from two major climate initiatives. Then-state Comptroller Glenn Hegar lauded the move as a “meaningful victory” for Texas’ economy.

The American Sustainable Business Coalition filed the suit in 2024 against Hegar and Attorney General Ken Paxton, alleging five different counts of free speech and due process violations. The ASBC subsequently moved for summary judgment on three of those claims in January 2025, and Albright ruled in their favor for all three Wednesday.

In a statement, David Levine, ASBC president and co-founder, said SB 13 had already cost the state hundreds of millions of dollars and called the ruling a “massive win” for sustainable businesses.

“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,” Levine said.

The Texas Comptroller’s Office and Attorney General’s Office did not immediately respond to a request for comment about the ruling.

Supporters of the suit praised the judge’s ruling as a win for state workers. Tim Hill, president of the Alliance for Prosperity and a Secure Retirement, called the ruling a victory for current and future retirees in the state.

“Judge Albright’s thoughtful ruling will help keep politics out of public finance,” Hill said in a statement. “We are gratified that today’s ruling puts a stop to the unconstitutional effort in Texas to include non-fiduciary issues when deciding how to invest public pension funds.”