Reuters    •   3 min read

Glass Lewis sues Texas over law limiting DEI, ESG proxy advice

WHAT'S THE STORY?

By Jonathan Stempel

(Reuters) -Glass Lewis, one of the best known proxy advisers, sued Texas on Thursday to block a first-of-its-kind state law limiting its ability to advise shareholders on diversity, environmental and governance practices.

In a complaint filed in Austin, Texas federal court, Glass Lewis said Texas' law was unconstitutional, violating its First Amendment right to freedom of association and protection against viewpoint discrimination.

Signed by Republican Governor Greg Abbott in June,

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the law targets "non-financial" advice on environmental, social and governance (ESG) matters, or diversity, equity and inclusion (DEI) matters, including for votes at shareholder meetings.

It requires proxy advisers to conspicuously tell clients that the advice is "not being provided solely in the financial interest of the company's shareholders," and to provide financial analyses supporting the advice.

The law takes effect on September 1.

Glass Lewis said the law unlawfully forces proxy advisers to broadcast Texas' preferred viewpoints when their own differ, including on hot-button issues that Republican state legislators viewed as "increasingly political."

It also said it will likely lose clients and suffer reputational harm if forced to tell clients its advice is bad for them and not in shareholders' financial interests.

Texas' Republican Attorney General Ken Paxton, who enforces the state's laws and is running for U.S. Senate in 2026, is the only defendant. His office did not immediately respond to a request for comment.

Glass Lewis said it has more than 1,300 institutional investor clients, including more than one dozen in Texas.

Many companies have this year scaled back or ended their support for DEI programs after Republican U.S. President Donald Trump campaigned against them.

The case is Glass Lewis & Co v Paxton, U.S. District Court, Western District of Texas, No. 25-01153.

(Reporting by Jonathan Stempel in New York; Editing by Aurora Ellis)

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