Challenging Texas Law that Restricts Shareholder Advocacy and Free Speech

This case challenges a Texas law, known as Senate Bill 2337 (SB 2337), that restricts what investors and advisors can say about matters affecting corporate behavior and long-term financial performance.

SB 2337 limits organizations’ ability to share research, analysis, and advice with shareholders when that information considers environmental, social, governance, or faith-based factors. The law labels those considerations as “nonfinancial,” even though they are widely recognized as critical to assessing long-term financial risk and value. It then imposes disclosure requirements, threatens penalties, and exposes organizations to lawsuits simply for sharing their views.

The plaintiffs—the Interfaith Center on Corporate Responsibility, United Church Funds, and Ceres—are nonprofit and faith-based organizations that work with institutional investors to promote responsible corporate practices and long-term value creation. As part of their missions, they engage in shareholder advocacy, provide research, and communicate with investors about risks and opportunities that affect companies’ financial futures. SB 2337 interferes directly with that work.

Although a federal court has already blocked enforcement of SB 2337 against the two largest proxy advisory firms, the law remains in effect for other organizations, including nonprofit organizations like the plaintiffs. Because the law is written broadly and vaguely, it chills protected speech and creates legal risk for organizations engaged in lawful shareholder advocacy.

The lawsuit argues that SB 2337 violates the First Amendment by restricting speech based on content and viewpoint and by compelling organizations to make statements they do not believe. It also argues that the law violates the Fourteenth Amendment because it is so vague that organizations cannot reasonably determine what conduct is allowed.

Democracy Forward represents the plaintiffs in seeking to block the enforcement of SB 2337 and to protect the constitutional rights of investors, advisors, and organizations to speak freely about investments and exercise shareholder rights without government interference.