Texas, like a number of resource-rich, low-regulation, free-market states in the West, is home to people ready to duke it out in the marketplace, but obedient to a live-and-let-live code that leaves them ready to listen to anyone speaking with the courage of their convictions. That attitude helped make states like Texas economic powerhouses in an increasingly global economy.
You wouldn’t expect Texans to threaten people with economic ruin for holding beliefs that some think are “wrong.” But Texas has just joined a growing group of states doing exactly that. And this worrying trend uses states’ first-responders, firefighters, EMTs, teachers, and civil servants as unwitting bargaining chips in a political game.
The bill at issue is S.B. 13, and the Legislature’s weapon of choice is the state’s pension dollars. Like similar legislation that has been proposed or enacted in a raft of oil-rich states, the bill takes aim at private investment management companies that focus on sustainable investing, a practice that has drawn the ire of the oil-and-gas lobby.
State pensions often contract with such private investment management firms to provide pension benefits to state and local employees. And S.B. 13 will prevent state pensions from having any dealings with firms that refuse to invest in fossil fuels.
Putting Politics Before Retirees’ Interests
This recent politicization of state-pension investment strategy is a serious mistake. During a time when public pensions around the country are underfunded—Texas itself is experiencing a $14.7 billion shortfall—investment decisions for those who protect and serve must be guided by one consideration, and one consideration only: maximizing returns.
Bans on oil-boycotting investment managers force pension planners to put politics ahead of smart investing and could take tremendous investment opportunities off the table. Sure, Big Oil is big business today. But sometimes the green investment is the smarter one.
After all, some of the world’s most vibrant, dynamic, and profitable companies like Tesla exist to compete against fossil fuels, meaning that sustainability-focused portfolios frequently out-perform traditional ones. And everyone knows that the current river of oil will not last forever. Forcing pension managers to put fossil fuels first is at best a short-term play—and a speculative one at that.
States must do better to fulfill the promises they’ve made to their millions of retired public employees and their families in exchange for their lifetimes of service, who are all depending upon smart decision makers to safeguard their futures.
A Violation of Free Speech
But state-sponsored boycotts of private companies because of those companies’ boycotts are more than bad public policy and bad stewardship. They are also a violation of fundamental First Amendment values. Everyone has the right to speak their minds and act in accordance with their consciences without being silenced and punished by the government.
And punishing people for engaging in a boycott violates the First Amendment’s protection for freedom of speech, because a boycott is more than a refusal to buy things. It is a refusal to buy things for a reason. That reason is exactly what these bans do.
Oil-rich states want to punish investment firms that refuse to invest in fossil fuels, and thereby silence their stance on one of the most serious political, economic, and social issues of the day. The courts routinely strike down such efforts to silence political dissent, as they did with the Texas Legislature’s last attempt to weaponize state power against private-firm boycotts: the “anti-BDS” ban passed last legislative session, which prevents the state from dealing with firms that refuse to invest in Israel.
Bans on oil-boycotting investment firms could—and should—meet the same fate. And the eventual futility of these bans only makes them worse, revealing them to be little more than an empty political gesture to a powerful lobby—one that will lead to a glut of expensive litigation but no real-world consequence. What is more, these boycotts of boycotters provide protectionism for an industry that needs no protection. Oil and gas are thriving in the U.S.
Over the past decade, the U.S. has become a net energy exporter, largely thanks to oil-and-gas booms in states like Texas. The industry is doing fine on its own. It does not need protectionist legislation propping it up.
Accordingly, legislation like S.B. 13 has states sticking their feet where they don’t belong, slanting the marketplace in unnecessary and unproductive ways, and sticking it to the marketplace of ideas that the First Amendment exists to protect. For all these reasons, it should be rejected.
This column does not necessarily reflect the opinion of The Bureau of National Affairs, Inc. or its owners.
J. Carl Cecere is the owner of Cecere P.C., a law firm devoted to Supreme Court and Appellate practice.