Free Speech, Free Markets: Why Climate Risk Belongs in Finance

Recent legal developments have shown that protecting the right of financial managers to evaluate and speak about climate risk is about defending the bedrock American principles of free speech and free markets. The freedom to identify and price climate risk is not a matter of political preference but a core function of fiduciary judgment and prudent risk management.

Politicians who try to punish financial managers for including climate risk in their practice are substituting independent judgment with state ideology. A recent federal decision striking down Texas Senate Bill 13 (SB 13) has made that crystal clear. The law tried to blacklist private companies and state entities that were deemed to have “boycotted” fossil fuels, sweeping in any firm that considered climate risk or joined collaborative initiatives like Climate Action 100+ or the Net Zero Asset Managers initiative. The court correctly held that SB 13 was “facially overbroad” under the First Amendment because it effectively penalized companies for their speech and associations on climate issues. The decision came as part of an order granting summary judgment against the Texas Comptroller in a lawsuit filed by the American Sustainable Business Council, the 501(c) (4) affiliate of the American Sustainable Business Network, acting on behalf of its members for SB-13’s violation of the members’ free speech and association rights protected under the First and Fourteenth Amendments of the United States’ Constitution. For climate-conscious fiduciaries and their clients, this ruling was not just a victory for sustainable investing; it was a win for the basic right to speak about material financial risk without fear of state retaliation. Texas has appealed the ruling, arguing that the state should be permitted the same freedom to invest as private actors, but this contention is belied by the state’s track record of using the law to punish speech. And it is inconsistent with long-standing precedent recognizing the government’s duty to use its purchasing power within constitutional bounds. The Court of Appeals granted a stay of the district court’s injunction, and as of the date of publication, the appeal is pending.

At the same time, a class action filed by an individual on behalf of 401(k) plan participants in the Western District of Washington highlights the inverse problem: fiduciaries may face liability for ignoring climate risk. The claim is simple and powerful: when managers overlook the long-term financial impacts of climate change, they may leave clients exposed to avoidable losses and breach their fiduciary duties. Telling those same fiduciaries that they may not consider climate risk, join peer initiatives, or integrate climate data into investment decisions could thus convert fiduciary negligence into a legal mandate.

Taken together, these developments expose a divide in best practices for risk assessment. While some politicians seek to gag climate-risk analysis through “anti-ESG” laws, fiduciaries and investors are starting to demand accountability when those same risks are brushed aside.

The guiding principle is simple: markets work best when fiduciaries, and their clients, are free to assess material risks, weigh competing evidence, and make decisions without political coercion.

For climate-conscious investors, like many of our clients at GreenPortfolio, the takeaway is just as straightforward: defending the freedom to integrate climate data into investment strategies is about more than portfolio alignment. It is about protecting the right to warn and to act on evidence, ensuring that capital markets – not politicians – shape how the future is priced.