Glass Lewis, ISS Sue Texas Over Proxy ESG, DEI Advice Restrictions

Proxy advisory firms Glass Lewis and ISS have sued the state of Texas to block a new law that restricts their ability to provide advice on diversity, equity and inclusion (DEI), environmental, social and governance (ESG) matters. The law, signed by Governor Greg Abbott and effective September 1, requires advisers to disclose that their advice is not solely in the financial interest of shareholders and to provide financial analyses supporting their recommendations. Both firms argue the law violates their First Amendment rights by forcing them to convey the state's preferred viewpoints, which differ from their own, and claim it will cause reputational harm and loss of clients. Texas Attorney General Ken Paxton, the sole defendant in the lawsuits, enforces the law and is running for U.S. Senate in 2026. The lawsuits highlight tensions over the political framing of ESG and DEI issues, with firms warning that the law undermines shareholder influence and serves corporate management interests. This legal challenge emerges amid broader national debates on the role of proxy advisers and corporate governance under President Donald Trump's administration.