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Texas State Sen. Bryan Hughes (R-Mineola) has introduced Senate Bill 946 (SB 946), a legislative measure aimed at preventing discriminatory lending practices that rely on subjective social credit scores, environmental, social, and governance (ESG) scores, or diversity, equity, and inclusion (DEI) standards. The bill is part of a growing effort to ensure that businesses and individuals receive fair access to credit without being penalized for political, ideological, or industry affiliations
What Does SB 946 Prohibit?
SB 946 specifically prohibits financial institutions from denying or restricting credit based on criteria unrelated to financial risk. The bill addresses three key areas of concern:
1. Social Credit Scores and ESG Metrics
Lenders would be barred from using ESG scores or other social credit rating systems to determine an entity’s creditworthiness. These subjective scoring systems can unfairly penalize businesses that do not align with certain environmental or social policies, particularly those in industries like fossil fuels or firearms.
2. DEI-Based Lending Decisions
Under SB 946, organizations cannot be denied credit based on their DEI policies or lack thereof. Some businesses have faced restrictions because they do not adhere to corporate diversity initiatives—a practice the bill seeks to eliminate.
3. Industry and Religious Association Protections
Financial institutions cannot deny loans or limit credit to organizations based on their industry or affiliation with religious institutions or free-speech media platforms. This provision directly protects businesses in agriculture, fossil fuels, firearms manufacturing, and conservative-leaning media outlets from politically motivated financial discrimination.
The Broader Context of SB 946: Pushback Against ESG Influence
SB 946 is part of a larger legislative effort to counteract the growing influence of ESG policies in financial decision-making. ESG scoring, initially intended to promote corporate responsibility, has been criticized for introducing subjective and ideological biases into financial risk assessments.
Supporters of SB 946 argue that these scoring systems:
- Undermine free enterprise by favoring politically aligned businesses over others.
- Disadvantage key Texas industries—such as oil and gas, farming, and firearms—by discouraging investment and financing in these sectors.
- Restrict economic opportunities for businesses that prioritize financial sustainability over social policy adherence.
Previous Legislative Attempts to Address ESG-Based Discrimination
In the 88th Texas Legislative Session (2023), Hughes authored SB 1683, which sought to protect organizations—but not individuals—from ESG-based discrimination. Unlike SB 946, that bill did not reference existing federal financial protection laws and ultimately failed to advance past the committee process.
SB 946 builds on that earlier effort by expanding protections to individuals and aligning with federal consumer credit protections under the Consumer Credit Protection Act.
Why SB 946 Matters for Texas Businesses and the Economy
As one of the nation’s largest economic engines, Texas is home to industries that frequently face scrutiny from ESG-driven investment strategies. The state’s energy sector, agriculture industry, and firearms manufacturing businesses have been disproportionately impacted by financial institutions that refuse to extend credit due to non-financial, politically motivated reasons.
By prohibiting ESG-based lending discrimination, SB 946:
- Ensures a level playing field for all businesses, regardless of political, social, or environmental policies.
- Protects industries vital to Texas’ economic strength, such as oil and gas, farming, and firearms manufacturing.
- Preserves free-market lending practices, ensuring that loans are issued based on objective financial criteria rather than ideological conformity.
Key Provisions of SB 946
Lenders must evaluate financial risk based on quantitative and impartial standards, explicitly excluding subjective ESG or DEI-related factors. The bill prohibits credit denial based on:
- Industry affiliation, including fossil fuels, agriculture, and firearms.
- An organization’s adherence (or non-adherence) to DEI policies.
- Associations with religious institutions or free-speech media platforms.
Financial institutions that violate these provisions could face legal challenges and penalties, ensuring enforcement of fair lending practices.
Implications for Businesses and Financial Institutions
For businesses, SB 946 offers much-needed financial protection by guaranteeing that credit access is determined by financial metrics rather than ideological compliance. This provides greater certainty for business owners looking to expand, invest, or maintain operations in Texas.
For lenders, the bill signals a major shift toward transparency in financial decision-making. While it restricts the use of ESG scores, it also encourages standardized, quantifiable risk assessments based on actual financial performance metrics.
Conclusion: A Step Toward Fair Lending in Texas
Texas Senate Bill 946 represents a significant legislative effort to safeguard businesses, individuals, and industries from ideological discrimination in lending practices. By prohibiting subjective ESG and social credit score evaluations, the bill reinforces Texas’ commitment to free enterprise, limited government, and economic fairness.
As the ESG debate continues, SB 946 provides a legislative framework for maintaining neutrality in financial decision-making—ensuring that businesses in Texas can operate free from politically motivated financial discrimination.
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