ESG and Moves to the Lone Star State

Business relocations to Texas are accelerating along with increased focus from ESG investors.

Companies from across the United States continue to look to Texas as a new home for their headquarters and operations. According to one source, over 125 companies in the tech sector alone have announced relocations to the state since the end of 2020. Yet, while local governments and business communities are often quick to welcome transplants, this trend is not welcome news to all. Some ESG advocates have begun to argue that Texas is a less ESG-friendly jurisdiction than others and, therefore, relocating to or expanding in the Lone Star State should come with negative ESG consequences.

One entry point for criticism has been perceived government and popular support for the state's historically robust fossil fuel industry, which purportedly leads to limited access to renewables, water stress, and less restrictive emissions controls in Texas. Other critiques have grappled with considerations more novel in the ESG space, such as voting legislation, abortion access, firearm safety, and other social justice issues. In light of these concerns, some ESG advocates argue that the environment in Texas is less conducive to pursuing ESG-investor-favored goals than those of other states and, by relocating to or expanding in Texas, companies incur avoidable ESG risks. We are also beginning to see ESG advocates objecting to relocating workforces, including by contending that relocation constitutes tacit or even outright support of disfavored government policies. 

Given this reality, companies considering a move should ensure that their planning processes include comprehensive consideration of how relocating to Texas may impact their ESG standing, and they should develop strategies to address any concerns preemptively. Companies that have already publicly committed to relocating can also benefit from such assessments, even if they may have escaped initial negative reactions. The ESG space experiences near daily evolutions, including in the growing sophistication of these types of criticisms, and new ESG-related regulatory rules, proxy policies, and voting guidelines are presently under consideration. 

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