Effective September 1, 2021, Texas Senate Bill 19 prohibits government entities from contracting with companies that have policies that restrict business with the firearms industry. The bill specifically targets banks and other financial institutions that have at least ten employees and are seeking government contracts of at least $100,000. Under the bill, such institutions are required to provide written verification that they do not have practices, policies, guidance, or directives that “discriminate” against a firearm entity or firearm trade association.

In 2018, several banks announced policies that set restrictions on the firearms industry after a shooting at Marjory Stoneman Douglas High School in Parkland, Florida. For example, Citigroup announced that it would prohibit retailers that are customers of the bank from offering bump stocks or selling guns to individuals who have not passed a background check or are younger than twenty-one. That same year, Bank of America announced that it would stop making new loans to companies that make military-style rifles for civilian use. These policies will likely trigger enforcement of the bill, and both institutions risk losing government contracting opportunities in Texas.

Given the scope of Texas Senate Bill 19, companies with Environmental, Social, and Governance (“ESG”) policies should be especially mindful of the government contracting implications of the new legislation. ESG policies often limit participation in the firearms industry and would constitute “discrimination” against firearm entities such that enforcement of Texas Senate Bill 19 would be likely. Ultimately, the bill is one of many approaches intended to regulate ESG policies at the state level, and companies should expect similar measures in the future.

Key Takeaway: Companies with ESG policies should assess the impact of Texas Senate Bill 19 on their government contracting opportunities, and should expect and prepare for heightened state regulation of corporate firearm policies.

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