Texas Anti-ESG Law Declared Unconstitutional

A federal judge has declared Texas’s anti-ESG investment law unconstitutional, delivering a significant legal setback to state-level efforts to restrict the use of environmental, social, and governance (ESG) criteria in public finance decisions. The ruling marks one of the most important judicial rebukes yet of the broader political campaign against ESG in the United States, led mainly by President Donald Trump.

The Texas law sought to prohibit certain financial institutions from doing business with the state if they were deemed to “boycott” fossil fuel companies. Under the statute, state agencies and pension funds were required to divest from financial firms accused of discriminating against energy companies, and banks seeking to underwrite municipal bonds had to certify that they did not engage in such boycotts. 

The measure formed part of a wider wave of Republican-led legislation designed to counter what critics describe as politically motivated climate-driven investment strategies. Texas’ anti-ESG position was one of the strongest in the country over the recent years, highly motivated by oil manufacturing. Legal experts note that the decision can be a start of a broader political battle on ESG. 

While the ruling only applies to Texas, it serves as an example of constitutional protection against targeting ESG-based investment policies. For financial organizations and asset management companies, this ruling offers legal clarity in a fragmented regulatory lifecycle. Uncertainty under anti-ESG laws has created a challenging situation for companies. 

Overall, the judgment speaks to the limits of constitutional authority in regulating investment practices, given consideration of political and/or ideological motivations. As ESG factors increasingly inform risk management and capital allocation strategies across the globe, it is anticipated that the politicisation of financial regulation will come under closer judicial scrutiny.

***

Further reading: Texas anti-ESG law declared unconstitutional by US judge

China tightens market oversight

The Chinese authorities are using a stricter regulatory drive to make a fundamental change in behavior in the nation’s equity markets and to create a so-called “slow bull,” which means the steady and predictable rise of asset prices, as opposed to wild and unpredictable price swings that have long been a factor in the nation.

At the core of the strategy is a major crackdown on unfair and irregular trading practices. For instance, regulators, led by the China Securities Regulatory Commission (CSRC), have processed a record number of cases involving market abuse, including pump-and-dump, spoofing, unlawful fundraising, and the misappropriation of funds by investors. Therefore, the increase in the drive to promote greater regulatory compliance is a major warning sign to those who are only engaging in speculative activities; they would be wise to beware that price oscillations leveraging on leverage will not be allowed to thrive.

Furthermore, aside from regulation, the structural conditions that have facilitated the surge of speculation have also been strengthened, as state-linked institutions are playing a supporting role. Sovereign-backed funds and Exchange Traded Funds (ETFs) reportedly adjust their holdings. While the strategy looks sophisticated and effective, there are still fundamental challenges. China’s markets still face structural concerns, like transparency gaps and geopolitical tensions, and are buffeted by macroeconomic headwinds.

The attempt to tighten market oversight serves as a conscious effort to shift from growth-at-all-costs trading dynamics to a more restrained, institutionally anchored one that privileges stability, credibility, and strategic economic positioning.

***

Further reading: China tightens market oversight to create ‘slow bull’ momentum

Four Partners Exit EY Following Potential Breaches Linked to Shell Audit

Auditing giant EY has lost four partners as concerns surface about security problems linked to its work with oil company Shell. These departures are part of a broader problem the auditing industry faces, namely, heightened scrutiny of audit quality, independence standards, and internal compliance controls.

The controversy reportedly involves either internal or professional demands from some audit team members who worked on Shell’s accounts. Specific details have not been made public, but the matter seems to involve possible breaches in audit independence or conflict-of-interest rules, which are central to audit integrity.

EY did not disclose any specific information about the contents of potential breaches, but noted that those concerned have left the firm. The nature of the departure indicates that the controversy was sufficient to trigger change at senior levels.

The move comes at a sensitive time for the global audit profession, which has faced increased scrutiny from regulators in the UK and elsewhere following a spate of corporate collapses and audit failures in recent years. Britain’s FRC has been working hard to raise audit quality, increase the separation between consulting and auditing, and enforce rules on auditor independence. 

Overall, such changes in the auditing industry highlight the sector’s fragility. It is mostly due to mounting pressure from both regulators and clients. Now, regulatory changes are constant, and while giant firms outsource it all to auditors, auditors themselves are increasingly struggling to handle the workload.

***

Further reading: Four partners leave EY after potential breaches of Shell audit, FT reports

For the latest updates, visit our LinkedIn page

First impression of the EU informal summit

At their informal retreat in Belgium, European leaders converged around a single strategic objective: transforming the EU from a fragmented regulatory space into a fully integrated economic power capable of competing with the United States and China by 2027.

“We have a clear priority – to strengthen economic growth in Europe. This is essential for our prosperity, to create quality jobs, and to sustain our economic social model.” – President António Costa

The meeting — described as a brainstorming session rather than a formal summit — nonetheless produced a striking degree of alignment around competitiveness, financial integration, industrial policy and regulatory simplification. At least it seems to be the case by looking at the speeches of the most notable figures after the meetings, like Friedrich Merz, Ursula von der Leyen, and António Costa. The main topics of discussion seem to be: energy autonomy with leaders linking the green transition not only to climate goals but to long-term strategic autonomy from other exporters like Russia; bureaucracy reduction and legal simplification with Von der Leyen pledging to reduce administrative burdens by €15 billion annually, and Merz echoing his non-paper agenda through to the informal summit; and trade without protectionism with leaders signalling acceleration rather than retreat, connecting the theme to the Mercosur agreement progress.

***

Further reading: The Merz-Meloni Non-Paper: How the New Germany-Italy Axis Could Destroy Europe

Editor’s Note: The opinions expressed here by the authors are their own, not those of impakter.com Cover Photo Credit: Sankalp Mudaliar