News Summary
A federal judge in Austin has temporarily blocked the implementation of Texas Senate Bill 2337, which mandated proxy advisory firms to disclose ESG-related recommendations. The law aimed to influence how companies approach environmental and social factors, but Judge Alan Albright raised concerns over its implications for free speech and accuracy. As a result, proxy firms can continue their operations without additional compliance pressures for now, awaiting a trial set for early February. The outcome could significantly impact ESG investing in Texas.
AUSTIN, TEXAS – A federal judge has temporarily blocked a Texas law scheduled to take effect on September 1 that mandates proxy advisory firms to disclose that their recommendations related to environmental, social, and governance (ESG) factors are not solely focused on maximizing profits. U.S. District Judge Alan Albright of the Western District of Texas granted an injunction after raising concerns over free speech implications and questioning the law’s intended purpose.
The law, known as Senate Bill 2337 (SB 2337), was championed by Texas Republicans as part of a broader agenda aimed at constraining investments tied to ESG criteria. This legislation requires proxy firms, such as Glass Lewis & Co. and Institutional Shareholder Services Inc. (ISS), to inform their clients that their ESG-related advice incorporates “nonfinancial factors.” Furthermore, it dictates that these disclosures must be made visible on their websites as well as given to shareholders who are voting on Texas-based companies.
In the hearing, Judge Albright expressed his uncertainty about the statute’s goals and who stands to benefit. He pointed out that the law requires advisory firms to communicate information they view as inaccurate. Following his ruling, legal representatives for Glass Lewis praised the court’s decision to halt the law temporarily, highlighting concerns surrounding its implications for free speech.
A trial to further assess the law’s legality is scheduled for February 2, with Judge Albright indicating that he will issue a written ruling within the next month. The Texas Association of Business, which has intervened in the case to defend the law, did not provide any comments following the judge’s ruling.
The implications of SB 2337 are far-reaching, potentially affecting a multitude of Texas-based companies, including prominent firms like American Airlines, Exxon Mobil, and Tesla. The legislation could dictate proxy advice for hundreds of businesses, particularly those that engage with ESG investment criteria.
Both Glass Lewis and ISS have previously filed separate legal challenges against the law, forming an alliance to oppose what they view as an attempt to enforce a politically conservative perspective on proxy advisers, especially concerning ESG and diversity, equity, and inclusion (DEI) issues.
Judge Albright’s remarks during the hearing noted the significant resources that ISS has already allocated to comply with the law, reportedly amounting to millions. ISS has approximately 40 employees actively preparing to implement the law’s requirements, which may now be on hold due to the injunction.
As the case unfolds, the Texas Attorney General Ken Paxton’s office has acknowledged the challenges it faces in finding witnesses who can effectively defend the law. In addition, Judge Albright has granted a motion for the Texas Stock Exchange and Texas Association of Business to participate as defendants in this ongoing dispute.
The contention surrounding SB 2337 highlights the divergent viewpoints on the validity of ESG investing and its impact on corporate shareholders’ financial interests. Judge Albright, who was appointed by former President Donald Trump, emphasized that the injunction disrupts what many see as a politically charged law.
The legal cases under consideration are identified as Glass Lewis v. Paxton and ISS v. Paxton, both in the Western District of Texas. As legal proceedings progress, stakeholders and businesses across Texas watch closely to see how this controversy surrounding ESG-related advisory protocol will develop.
Deeper Dive: News & Info About This Topic
- Reuters: Judge Blocks Enforcement of Texas Law Restricting DEI, ESG Advice
- Google Search: Texas law ESG disclosure
- Financial Times: Texas ESG Law Blocked
- Wikipedia: Social responsibility of business
- AOL: Judge Blocks Enforcement of Texas Law
- Encyclopedia Britannica: Environmental, Social, and Governance criteria
- ESG Dive: ISS, Glass Lewis Sue Texas AG
- Encyclopedia Britannica: Legislation
- Dallas Express: Texas Defends Law Targeting ESG
- Google News: Texas ESG disclosure law
Author: STAFF HERE COLLEGE WRITER
The COLLEGE STATION STAFF WRITER represents the experienced team at HERECollegeStation.com, your go-to source for actionable local news and information in College Station, Brazos County, and beyond. Specializing in "news you can use," we cover essential topics like product reviews for personal and business needs, local business directories, politics, real estate trends, neighborhood insights, and state news affecting the area—with deep expertise drawn from years of dedicated reporting and strong community input, including local press releases and business updates. We deliver top reporting on high-value events such as the Brazos Valley Fair & Rodeo, Chilifest, and Aggie Muster. Our coverage extends to key organizations like the Bryan-College Station Chamber of Commerce and United Way of the Brazos Valley, plus leading businesses in education, biotechnology, and retail that power the local economy such as Texas A&M University, Fujifilm Diosynth Biotechnologies, and H-E-B. As part of the broader HERE network, including HEREAustinTX.com, HEREDallas.com, HEREHouston.com, and HERESanAntonio.com, we provide comprehensive, credible insights into Texas's dynamic landscape.
