A federal judge just ruled that Texas’s anti-ESG law is unconstitutional. That may sound niche, but it has real implications for free speech,  and a wave of similar laws we’ve seen across the country over the past few years. So please, even if you’re not in Texas, hang out for a minute.

(For those who prefer to watch a video, you can do so on my YouTube here).

Before we talk about the court ruling, we need to be clear about one thing upfront: what ESG actually means, because without that context none of this makes sense.

ESG stands for Environmental, Social, and Governance. At its core, ESG is a set of principles and practices that help companies (and sometimes investors) think about long-term risk and responsibility.

Environmental is related to things like climate exposure, pollution, or toxin and materials regulations that could affect a company’s bottom line. Social covers labor practices, worker safety, supply chains,  whether companies treat workers fairly. And Governance is about how a company is run internally; things like executive pay, corruption, shareholder rights, and internal accountability.

Investors don’t just blindly follow ESG. They use it as one lens among many to understand risk and long-term stability. Companies may also use ESG principles to guide policy, reporting, or even shareholder engagement. Many large F100 and F500 companies have entire departments dedicated to just ESG, and there are think tanks and consultancy firms that focus solely on those issues, as well. In full transparency, I used to work for one.

The point is: ESG isn’t a law or a mandate, but a set of principles that provide a way of thinking about what might affect a company down the road, and what impact that company has on environment and people.

Now, here’s where Texas enters the picture. In 2021, Texas passed a law called Senate Bill 13. The law barred the state from investing public money (including teacher and state employee pensions) with financial firms that “boycott” fossil fuel companies. It also required the state comptroller to create and maintain a blacklist of firms deemed hostile to oil and gas, and to divest state funds from them unless those firms changed their position.

This week, a Trump appointed federal judge ruled that law unconstitutional.

The court found that SB 13 violates the First and Fourteenth Amendments because it allows the state to penalize companies for protected expression related to fossil fuels. The judge also ruled the law was overly broad, meaning it swept in a wide range of lawful activity and gave the state too much discretion to punish companies based on viewpoint.

That matters because the Constitution doesn’t allow the government to use financial pressure to enforce ideological alignment.

The ruling is especially notable because it didn’t hinge on technicalities; the court addressed the core mechanism of the law itself: the use of blacklists and divestment to coerce private actors into adopting the state’s preferred economic and political positions.

And this is not just a Texas issue. Over the past several years, multiple states have passed or proposed anti-ESG laws that restrict public contracts or investments based on whether firms consider climate risk, labor practices, or corporate governance concerns. This decision doesn’t automatically invalidate those laws, but it gives challengers a strong constitutional framework to work with.

If a law punishes companies for expression, viewpoint, or lawful risk analysis, instead of regulating specific actual misconduct then it’s on shaky ground.

There’s also a practical issue here that will get buried in the lede: public pensions.

Public pension funds exist to protect the retirement security of teachers, firefighters, and state employees. When states impose ideological constraints on how those funds can be managed, they risk undermining fiduciary responsibility and long-term financial stability.

Courts are increasingly wary, lately, of laws that seek to subordinate pension management in order to affirm political agendas.

Zooming out, this ruling is a reminder that states don’t get to decide which risks are “real” by legislative fiat, and they don’t get to punish disagreement by weaponizing public money.

Texas has said it will appeal, obviously. But I think the precedent set here is clear: laws that rely on ideological blacklists and viewpoint punishment will face serious constitutional limits, even under Authoritarianism.