There was a time, not that long ago, when ESG was the dominant topic in the corporate governance world. Every company was expected to have a sustainability plan and to maintain a respectable ESG profile. However, as a result of now years-long ESG backlash, the predominance of ESG as a governance topic has diminished. Indeed, with the Trump administration’s active anti-ESG policies and actions, including among other things several anti-ESG executive orders, as well as the actions of several red state governors and legislatures, it now sometimes feels that ESG as a governance topic is in full retreat. However, two recent developments – including a court decision striking down a Texas state anti-ESG law and the filing of ESG-supportive ERISA liability lawsuit – suggest that, at a minimum, there may be more of the ESG story yet to be told.

Court Strikes Down Texas Senate Bill

Numerous red state legislatures have passed anti-ESG laws. Among them is Texas Senate Bill 13, which was enacted in 2021. The legislation’s main thrust is to require state pension funds and other governmental investment entities to divest from any financial firm that “boycotts energy companies.” The bill seeks to prohibit, as a “boycott,” any action taken by financial firms “without an ordinary business purpose” to “penalize, inflict economic harm on, or limit commercial relations” with fossil fuel companies. Among other things, the Texas Comptroller is empowered to compile a blacklist of financial firms deemed to be boycotting.

In August 2024, the American Sustainable Business Council (ASBC), representing businesses and other organizations that advocate for sustainable business practices, filed a lawsuit in the Western District of Texas challenging the constitutionality of SB 13. The ASBC challenged SB 13 on two grounds: that the statute’s overbreadth unconstitutionally interfered with free speech under the First Amendment; and that the statute was unconstitutionally vague, particularly with respect to the meaning of the term “boycott,” in violation of the Fourteenth Amendment. The ASBC moved for partial summary judgment.

In a February 3, 2026 order (here), Western District of Texas Judge Alan Albright (a 2018 Trump appointee) granted the ASBC’s summary judgment motion, holding that the Texas law was facially overbroad under the First Amendment and unconstitutionally vague under the Fourteenth Amendment. The district court’s ruling is subject to appeal.

In holding that the statute violated the First Amendment, Judge Albright focused on the statute’s definition of “boycott” as “any action that is intended to penalize, inflict harm, or limit commercial relations with” fossil fuel companies. Judge Albright said that the phrase “any action” is not limited to purely commercial conduct and therefore penalized activities protected by the First Amendment.

In ruling that the statue was unconstitutionally vague in violation of the Fourteenth Amendment, Judge Albright said that the sweeping definition of “boycott” lacked objective standards and failed to provide a reasonable opportunity to understand what was prohibited. Judge Albright also found that the statute’s feature allowing the Comptroller to develop a blacklist lacked clarity and had the potential for arbitrary enforcement.

In a March 4, 2026, memo commenting on the Court’s ruling finding SB 13 unconstitutional, the Freshfields law firm notes that the court’s ruling arises in the context of “growing nationwide trend of states enacting anti-ESG laws.” The ASBC’s lawsuit represents a “direct challenge to the legality of such state-level interventions.”

Though as a district court ruling the decision here has no binding authority on other district courts, it could have “some persuasive authority for court in other states considering challenges to anti-ESG legislation, and the ruling may even, the law firm memo says, “function as a bellwether for other states that have enacted similar anti-ESG legislation.”  

To be sure, Texas likely will appeal, meaning at a minimum that the ASBC’s legal challenge will be subject to further judicial review. The law firm memo notes that “for clients navigating the increasingly fragmented ESG landscape, both in the U.S. and outside the U.S., constitutional challenges to anti-ESG laws add one more layer of complexity.”

The Cushman & Wakefield ERISA Liability Lawsuit

In a different but related development, on March 3, 2026, a participant in the Cushman & Wakefield 401(k) Plan filed a lawsuit in the Western District of Washington, alleging that the company and its investment committee violated the liability provisions of ERISA by selecting and retaining an “unsuitable” investment option in the plan, alleging, among other things that the fund option was selected despite “numerous glaring red flags, including chronic underperformance, dangerous aggregation of climate change-related financial risk, unreasonably high fees, and limited market acceptance.” A copy of the complaint can be found here.

The complaint alleges that the Cushman & Wakefield 401(k) plan is “one of the largest retirement plans in the United States.” The complaint notes that Cushman itself has a long record of “managing climate-related financial risk,” publicly cautioning that “climate risk is financial risk.” The complaint alleges that notwithstanding the company’s recognition of climate-related financial risks, the company exposed employee retirement savings “to significant, unreasonable climate-related financial risk,” among other things, by including as a fund option on the Company’s 401(k) menu the Westwood Quality SmallCap Fund.

The Westwood Fund, the complaint alleges represents “an unsavory combination of financial underperformance and unreasonably high fees,” while at the same time “exposing investors to massive amounts of climate-related financial risks that threaten to wipe out years of savings under any number of plausible scenarios.” The Fund, the complaint alleges, is “indifferent to climate risk,” as a result of which, the fund as aggregated “inordinate levels of climate-related financial risk across its investment sectors.” Among other things, the complaint alleges that the Fund is “more than twice as exposed to sectors that are particularly vulnerable to climate-related financial risk.”

The complaint alleges that the defendants knew of the Fund’s poor performance and climate exposure when the Fund was selected. Moreover, the complaint alleges, the Fund’s selection was not just the result of “imprudence” but was also the result of influence from Fidelity, which plays an institutional role for the Fund.

The plaintiff seeks to require the defendants to restore the losses “caused by the mismanagement of the Plan and to obtain injunctive relief to prevent further mismanagement.”

Discussion

In recent months, it has at times felt as if, as a result of the anti-ESG backlash, ESG as a governance topic has been in full retreat. The developments described above suggest that though the anti-ESG forces may well have occupied the field, advocates of ESG have not been entirely vanquished, nor have they gone away.

The Texas statute was of course an aggressive action of political power, while the court’s decision striking down the law demonstrates that even vigorous political power is subject to constraints. ESG advocates will be especially heartened by the court’s First Amendment finding, vindicating as it does the proposition that that political power cannot be used to cancel viewpoints that the political powerful oppose or to prevent the advocates of opposing points of view from expressing and acting on their opposing views.

The new lawsuit, which has only just been filed and which may or may not prove to be meritorious, if nothing else represents the view that companies’ actions face scrutiny not just from the anti-ESG advocates but from pro-ESG advocates as well.

Both of the developments discussed above highlight the point that, as the two opposing points of view seek to advance their respective agendas, companies themselves may feel that they are required to operate while caught in the crossfire.

At a minimum, these developments underscore the point that while it may have seemed that ESG governance principles have been in full retreat, ESG concerns have not been totally eclipsed. The upshot is that thought anti-ESG advocates have unquestionably changed the environment around ESG issues, the underlying ESG issues themselves have not gone away.

I will say this: for a time there, it seemed to me that ESG, once a key topic on this site, had dropped off of the docket. The recent developments suggest that though the environment unquestionably has changed from where it was three or four years ago, ESG is not dead, and will remain a key topic of corporate governance.