We are in an anti-democratic moment. People with money and power refuse to heed those who have neither. This is true in Washington. But, it is also true in statehouses where state officials try to intimidate into non-action and silence investors who believe sustainability is key to long-term investment success.

There is nothing “free market” about this effort. Instead, it is an attempt to bolster the fossil fuel industry at the expense of shareholder prerogatives.

Unconstitutional Anti-ESG Laws

At the forefront of attacks against investors who recognize the need to account for sustainability factors are myriad state anti-ESG laws, including Texas SB13.

SB13 is sweeping. Under it, Texas has created a blacklist of companies that supposedly “boycott” fossil fuel interests, including companies that merely belong to associations such as Climate Action 100+ and Net Zero Asset Managers initiative (NZAM), and requires as a condition of managing state investments that companies verify their support of Texas’s position on fossil fuels.

By arbitrarily allowing Texas to blacklist certain companies under some vague notion of boycott while compelling others to support government-preferred positions, SB13 prohibits asset managers from exercising their rights to freedom of expression and association. This is why SB13 now faces a challenge in court where plaintiffs allege that the law violates the First and Fourteenth Amendments. The case is ongoing, but success will demonstrate that states cannot arbitrarily restrict how entities approach investing.

Weaponizing Antitrust Law

Following the 2015 Paris Climate Accords, several business climate collaborations were created, including Climate Action 100+ and NZAM, to establish net zero targets and other carbon accounting frameworks. A broad-based effort to misuse antitrust law to chill such constructive engagement has now reached a fever pitch, with lawsuits and investigations ostensibly aimed at a nonexistent “climate cartel.”

Late last year, for example, the Texas Attorney General, along with several Republican AG allies, sued Blackrock, State Street, and Vanguard, alleging that these large asset managers pressured coal companies into reducing their coal supply as part of a scheme involving Climate Action 100+ and NZAM to reduce greenhouse gas emissions.

The case makes little antitrust sense. The asset managers do not control the relevant coal companies, there is no compelling evidence that they conspired to limit production, and antitrust law allows for some cooperation to mitigate climate risk. As Colorado AG Phil Weiser, a Democrat who is not involved in the suit, noted months before Texas filed its case, “antitrust law long has condoned collaborative efforts to provide consumers with additional information—including businesses’ commitment to using best practices to address climate issues. . .”

The Texas case, then, is not about antitrust law; it is about intimidating companies to act as Texas wants, thereby limiting shareholder choice. Since the case’s filing, Blackrock and State Street left Climate Action 100+ while Blackrock and Vanguard left NZAM. If asset managers are too scared to address the risks climate change poses to their portfolios, shareholders and investors should remind them.