Texas AG Paxton Targets ESG and DEI at Proxy Advisory Firms ISS and Glass Lewis

Texas AG Ken Paxton filed suit (July 29) against proxy advisory firms ISS and Glass Lewis, alleging deceptive trade practices in connection with ESG-related voting recommendations — joined by AGs from Iowa, Nebraska, and West Virginia. The lawsuits allege that the firms' ESG-oriented recommendations violate consumer protection laws and improperly influence corporate governance decisions. This is the most aggressive state-level enforcement action against ESG governance infrastructure this year — targeting not ESG policies at asset managers but the advisory layer that shapes how institutional investors vote. The Protecting Americans' Retirement Savings From Politics Act, currently before the full House after committee approval in April, would add federal-level restrictions if enacted. For law firms advising proxy advisory firms, institutional investors, and corporations engaged in ESG-related shareholder engagement: the Texas litigation is in its early stages and will face significant First Amendment and preemption arguments, but it signals that state enforcement against ESG governance actors is now a live risk to manage alongside regulatory compliance.