Relating to prohibiting certain state governmental entities from investing in certain Chinese-affiliated entities.
Summary
SB 667 creates a new chapter in the Texas Government Code that directs certain state governmental entities to avoid investing in specified Chinese-affiliated or otherwise federally restricted entities. The bill defines “restricted entity” broadly to include certain publicly traded companies tied to the People’s Republic of China, entities controlled by the Chinese government or Communist Party, entities subject to China’s National Intelligence Law, Chinese military companies, and other entities identified on federal restriction lists for national security, human rights, or unfair trade concerns.
The bill requires the Texas Comptroller to maintain and distribute a list of restricted entities, and it requires affected state entities to identify direct and indirect holdings in those entities, notify the entities, and divest publicly traded securities on a phased schedule. It generally requires 50% divestment within 180 days of notice and full divestment within 360 days, while allowing limited delays or exceptions when divestment would conflict with fiduciary duties or cause measurable losses or benchmark deviations. The bill also bars new purchases of listed restricted entities, requires annual public reporting, and authorizes the attorney general to enforce the law.
Impact
SB 667 affects the investment practices of the Employees Retirement System of Texas, Teacher Retirement System of Texas, Texas Municipal Retirement System, Texas County and District Retirement System, Texas Emergency Services Retirement System, and the Permanent School Fund. It adds statutory duties for the comptroller to identify and publish restricted entities, for state entities to monitor holdings and divest, and for fund managers to respond to requests to remove restricted entities from pooled investment vehicles. The bill also provides indemnification and limits private lawsuits related to actions taken under the chapter, while preserving fiduciary-duty-based exceptions where divestment would be inconsistent with legal investment responsibilities.
Sentiment
The bill appears to have passed with support but also meaningful opposition, especially in the House. It passed the Senate 24-6 and the House 90-50, indicating a clear majority in favor but not broad consensus. The overall sentiment in the available record suggests strong concern among supporters about national security, foreign influence, and state investment exposure to Chinese-linked firms, balanced against skepticism from opponents about the breadth of the divestment mandate and its effects on investment management.
Contention
The main points of contention are the scope of the prohibited entities and the effect on fiduciary investment duties. Critics are likely concerned that the bill sweeps in a wide range of companies based on federal lists and government determinations, potentially limiting diversification or forcing divestment at unfavorable times. Supporters appear focused on reducing state exposure to entities associated with the Chinese government, military, or intelligence apparatus and on aligning Texas investments with national security interests. The bill’s built-in exceptions for fiduciary duty, loss in value, and benchmark deviation suggest lawmakers anticipated disputes over financial impact and investment performance.
Public Investments; to prohibit Board of Control of ERSA and TRSA from investing with restricted entities affiliated with Communist Chinese military companies
State procurement; Procurement Protection Act of 2026; prohibiting certain entities from entering into contracts with certain companies; disclosure statements; penalties; exceptions; effective date.