American Sustainable Business Council v. Hegar

The government has no obligation to finance private companies’ environmental, social, and corporate governance (ESG) policies with taxpayer money, and the First Amendment does not confer an affirmative right to government subsidies. The Liberty Justice Center filed an amicus brief in American Sustainable Business Council v. Hegar to defend this principle: the State of Texas has the right to manage its own investments and avoid entanglement with partisan corporate activism.

In 2021, the Texas Legislature enacted a statute requiring state pension funds to divest from companies that “boycott” the energy industry. The law was designed to ensure that the State does not hold a financial interest in the undermining of its own economy by supporting companies that engage in ESG practices targeting fossil fuels.

The American Sustainable Business Council challenged the law, claiming it violated the First and Fourteenth Amendments by penalizing companies for their speech and viewpoints. A federal district court agreed, ruling that the law was overbroad and void for vagueness, and enjoining Texas from enforcing the divestment requirements.

On appeal, the Liberty Justice Center urges the Fifth Circuit to reverse. Longstanding history and precedent–from the Founding Era to the present, show that the government has broad discretion over what it chooses to subsidize. As the Supreme Court has held, a refusal to fund protected activity is not the same as imposing a penalty on that activity. Companies remain free to engage in ESG practices, but they have no constitutional right to do so using the taxes of Texas citizens.

Furthermore, the district court’s ruling imperils First Amendment principles by opening the door to foreign influence over American speech. Many ESG mandates are driven by European Union regulations that reach across borders. By forcing Texas to link its pensions to companies complying with these mandates, the ruling undermines the state’s ability to guard against foreign influence and censorship.

“We all have a right to invest our money in causes we believe in,” said Reilly Stephens, Senior Counsel and Director of Amicus Practice at the Liberty Justice Center. “But the corollary is that no one else is required to fund that cause for you–and certainly not taxpayers, who should be free to decline to invest in causes they oppose.”

The Liberty Justice Center is asking the Fifth Circuit to reaffirm that the government cannot be forced to “choose winners and losers” by subsidizing corporate activism. The Constitution protects the right to speak, but it does not require the public to pay for it.