Published on Jun 27, 2026
By Nathan Johnson
In the spring of 2021 the Texas Legislature passed Senate Bill 13, the “anti-ESG” law. It was quite a theatrical spectacle, unhindered by free-market capitalism, notions of limited government and the U.S. Constitution.
The bill’s proponents claimed that “woke politics” was driving global banks and asset managers to “boycott” the state’s mighty oil and gas industry for non-economic reasons, resulting in reduced access to capital for hydrocarbon operations and an unacceptably high risks for investors.
Never mind the fact that these same financial firms – retained by investors to exercise independent business judgment to maximize returns and, when demand arose, to cater to private investor preferences – held and managed hundreds of billions of dollars in hydrocarbon industry investments.
At the time, competition from renewable wind and solar energy investment (the “E” in “environmental”), spurred by demand from vocally conscientious investors (“social”) and by federal subsidies (“governmental”) probably was marginally raising the cost of capital for the oil and gas industry.
That’s the capital market at work. But the politics of ESG didn’t include much room for market analysis.
Were firms over-hyping the renewable-energy industry? It certainly wouldn’t have been the first instance of hype driving markets. But if the hype rose to the level of deliberately misleading investors and/or promoting anti-competitive practices, state and federal laws provide ample regulatory enforcement mechanisms to punish such behavior.
None of this mattered though because the Republican legislative majority decided to spin a tale of a nonexistent threat from global capital markets to drive a voter backlash against ESG investing.
I argued at the time that the bill was politically motivated, economically foolish and patently unconstitutional.
Last February the U.S. District Court for the Western District of Texas agreed on all three points. The court found that SB 13 was politically motivated, economically damaging and in violation of the First and Fourteenth amendments to the Constitution; it issued a permanent injunction against enforcement of the law. The injunction remains in effect pending a resolution of the (politically motivated) appeal filed by Ken Paxton, whom, not incidentally, I intend to replace as Texas Attorney General.
The court held that Texas cannot punish private firms for private investment decisions or for expressing views about climate risk; neither can the state coerce private companies’ speech or investment strategies to serve the legislature’s political agenda.
The injunction follows years of economic and reputational damage to Texas. By disqualifying firms from the bond underwriting market, SB 13 raised financing costs for municipal infrastructure projects. It introduced unnecessary (and unconstitutional) compliance burdens on state funds, cities and financial firms, including divestment of assets determined by professionals to merit inclusion in state investment portfolios. It disrupted and distorted capital markets around the world while sacrificing hundreds of millions of dollars in lost economic activity at home.
The bureaucratic burden was staggering. SB 13 forced the state Comptroller of Public Accounts to administer a blacklist regime that no one in the financial markets respected but everyone had to pretend to respect. Though the comptroller’s office tried to minimize the damage, SB 13 blacklisting barred major domestic and international financial institutions from underwriting municipal bonds, managing pension assets and providing banking services to state agencies. The list reportedly included, in one respect or another, Amundi, Bank of America, Barclays, BlackRock, BNP Paribas, Citigroup, Credit Suisse, Goldman Sachs, HSBC, JPMorgan Chase, Nordea, Schroders, and Wells Fargo, plus insurers Allianz, Lloyds, and Zurich.
The hypocrisy of SB 13 ran thick as Texas crude. The same politicians who campaign against “big government” inflicted on the state one of the most intrusive, bureaucratic and heavy‑handed interventions in private capital markets in modern Texas history.
Ironically, the oil and gas industry that SB 13 was supposed to protect from renewable energy investment today relies extensively on renewable energy: wind and solar energy are, to a significant degree, powering the boom in natural gas production.
In fact, while SB 13 caused widespread damage in Texas, the oil and gas industry did very well indeed, thank you. And it wasn’t because of SB 13. At least in part, global oil and gas markets responded to the Trump administration’s violent reversal on renewable energy policy and to demand inflated by armed conflicts in Eastern Europe and the Middle East. These factors, also ironically, are examples of the “G” in “ESG.”
The point here is not that politicians should play no role in shaping, maintaining and regulating markets. Rather, the story of SB 13 illustrates how politicians do damage when they interfere with private capital markets for political purposes. Further, the notion of “limited government” should not be limited to instances of political convenience. We limit governmental power and interference in commerce in recognition of the fact that well-crafted and well-regulated markets produce far better outcomes than demagoguery ever can.
Nathan Johnson is a lawyer, a member of the Texas Senate and the Democratic nominee for Texas Attorney General.
