Texas Senate Bill 13 ("SB 13"), enacted in June 2021 and authored by State Senator Brian Birdwell, was among the first U.S. laws targeting Environmental, Social, and Governance ("ESG") investing practices. (Mollie Duckworth, Latham & Watkins LLP). At its core, SB 13 prohibited Texas public entities from investing in or contracting with companies deemed to "boycott" the fossil fuel industry. (Texas Policy Research). ESG policies “aim to promote sustainable and responsible business practices” in addition to the previously paramount financial bottom line. (Deloitte). ESG practices trace their roots back to the early 1960s, led by social activists and religious groups seeking to spark corporate responsibility on ethical investing. (Thomas J. Billitteri, CQ Press). Sustainability pioneers like John Elkington popularized the “triple bottom line,” or the ideas that corporations must account for their societal and environmental impacts in addition to their profitability. (John Elkington, Harvard Business Review). Today, ESG practices are performed across industries, focused on issues, “ranging from human capital and compensation issues, to climate change, deforestation, and water and waste management, to supply chain management.” (Jurgita Ashley, Harvard Law School Forum on Corporate Governance). In the energy context, ESG policies condition investing on environmental and social criteria, threatening states like Texas by disfavoring their core oil and gas industries based on ideological grounds. (Ayden Runnels, The Texas Tribune). Thus, the law represented a “high profile” effort to combat ESG practices that the Texas Senate viewed as a threat to the state’s energy sector. (Texas Policy Research). This discussion explores SB 13’s implications, the recent ruling of its unconstitutionality, and the market’s incipient response to SB 13’s discontinued enforcement.
Read MoreIn 2017, the Tax Cuts and Jobs Act (“Act”) created the notion of an Opportunity Zone (“OZ”) to encourage private investment into economically disadvantaged communities. (Blake Christian, Holthouse). The goal of an OZ is to stimulate economic growth and job creation by offering tax incentives for investors in these communities. Id. Under the Act, a company that realizes a capital gain can reinvest the money in a Qualified Opportunity Fund (“QOF”) to defer capital gains taxes. (Nancy Anderson, Holland & Knight). Investments held for five to seven years before 2026 could reduce taxable capital gains by up to 15%. Id. Originally, OZs were intended to end in 2026, but the One Big Beautiful Bill Act (“OBBBA”) makes the program permanent while refining the rules to better target truly disadvantaged areas. Id. This post seeks to understand how the OBBBA reshapes OZs by narrowing eligibility to target the most disadvantaged tracts, introducing Qualified Rural Opportunity Funds (“QROFs”) with enhanced incentives, establishing a ten-year re-evaluation process to ensure designations remain accurate, and imposing stricter compliance measures to prevent abuse and promote genuine community investment.
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