Wall Street to Y’all Street: How anti-woke policies have companies shifting to Texas

Texas Governor Greg Abbott's vision of transforming the state into an “economic powerhouse on the global stage” is coming closer to fruition, as companies flock to the deep-red state that has bucked progressive policies.

The latest high-profile moves came in the financial sector, with the NYSE Group announcing a new exchange in the state in February. That followed the upstart TXSE Group, which has received backing from powerful players including BlackRock and Citadel Securities since it announced plans for a new exchange last year, as Texas pushes to become America's pre-eminent financial hub.

“Texas is the most powerful economy in the nation, and now we will become the financial capital of America," Mr Abbott said in a news release at the time.

Texas is already an economic juggernaut in the US. With a gross domestic product of $2.6 trillion last year, it would rank as the eighth largest economy in the world if it were a country.

Driving this economy has been Texas's oil and energy industry, which accounted for $751 billion (or 34.5 per cent) of total private sector GDP in 2022, according to the Texas 2036 project.

The state's economy expands beyond conventional energy with Austin growing into a tech hub; manufacturing and finance in Dallas, and a sprawling healthcare sector in Houston.

Connecting these metropolitan hubs are thousands of miles of roadways and railway tracks that help support trade within the US. Dozens of free trade zones, more than 20 seaports and Texas's proximity to Mexico also help support global trade.

Among the major trading partners is the UAE, which imports $2 billion in goods each year from Texas. Adnoc, Masdar and Mubadala all have various investments and projects in the Lone Star State.

So, too, do other countries in the Gulf including Saudi Arabia and Qatar.

Anti-woke in Trump 2.0

Supporting Mr Abbott's vision is a conservative legislature that has implemented a raft of pro-business policies and laws pushing back on more progressive issues.

Among the more high-profile businesses relocating to Texas in recent years was Tesla, whose chief executive Elon Musk uprooted it from California because of the state's pandemic restrictions and schools' teachings on gender identity.

He also moved Tesla's incorporation from Delaware - a blue state - to Texas last year after a state judge voided his $56 billion pay package. The state legislature passed a law earlier this week to keep businesses from following Mr Musk's lead.

In January, Meta chief executive Mark Zuckerberg said he would move the company's content policy team to Texas. It was one of numerous conciliatory efforts Mr Zuckerberg has made towards Donald Trump since the 2024 presidential election.

Matthew Bey, senior global strategist at the RANE Network, expects Texas to widen its gap with liberal strongholds like New York or California as Mr Trump pushes his own anti-woke agenda at the federal level.

“A state that's firmly Republican seems to be in a position to benefit from that,” he said.

The latest target against so-called woke policies: the environmental, social and governance (ESG) movement.

ESG is an investing principle that investors measure when looking at a company's sustainability efforts. New York's Nasdaq does not mandate its listed companies report on ESG.

The movement has faced backlash from conservatives, including Mr Abbott who said the push against it has provided an opening to launch an exchange in Texas. Critics say the focusing on environmental and social goals is a distraction from a company's main objective to deliver profits for its shareholders.

A 2022 Wharton study found that anti-woke policies – nominally against the ESG movement – also cost Texas taxpayers hundreds of millions of dollars a year.

Mr Abbott has also been a vociferous critic of diversity, equity and inclusion (DEI) policies, which broadly refer to efforts used to promote fairness in workplaces, universities and other agencies. Mr Abbott and other critics have condemned DEI policies as anti-meritocratic, while proponents say the initiatives help to ensure historically marginalised communities have equal opportunities for jobs.

The Texas governor signed an executive order in January directing state agencies to drop DEI practices. Texas joined nine other states that month in warning major financial institutions that their DEI and ESG policies could lead to enforcement actions if they were found to breach state or federal law.

BlackRock, Goldman Sachs, Citi and Bank of America have all rolled back parts of their DEI policies since Mr Trump, himself a critic of DEI initiatives, won the 2024 US presidential election. Morgan Stanley and JPMorgan both dialled back DEI mentions in their most recent shareholder reports.

A growing financial hub

The TXSE Group took a further step towards becoming a national securities exchange in January after filing a Form 1 registration with the Securities and Exchanges Commission. The group, which had an initial cap raise of $161 million, is to headquarter the exchange in Dallas, the second largest financial hub in the US after New York.

The upstart exchange was part of a move to flex Texas's financial might. The state is home to 55 Fortune 500 companies, ahead of both California (53) and New York (50).

A number of Fortune 500 companies have also relocated their headquarters from California to Texas in recent years, including Tesla, Oracle, Charles Schwab, Hewlett Packard Enterprise, AECOM and CBRE.

TXSE Group chief executive and founder James Lee has been outspoken against the ESG movement and said the Texas-based exchange would be a neutral platform serving businesses' and investors' needs. Joining the TXSE Group is the NYSE Group, which announced a new exchange in Dallas in February.

The TXSE Group boasted that its capital raised – $161 million – make it the most well-capitalised exchange to file with the Securities and Exchange Commission. But whether the anti-woke exchange can challenge Wall Street remains to be seen.

Previous anti-woke upstarts have failed, including the GloriFi start-up bank that closed its doors in 2023 after just three months of doing business.

Trump exposure

While Texas could benefit from Mr Trump's America First agenda, it is also one of the states most exposed to it. That is largely because of its proximity to its southern neighbour Mexico, its largest trading partner.

“Because of its location and economic integration, Texas would experience by far the largest losses of any state,” said Ray Perryman, founder of The Perryman Group, an economic consulting firm in Waco.

Trade totalled $272.3 billion between the two in 2023. Mexico was Texas's top import-source country that year with $142.7 billion in imports, according to the governor's office. Those would all be subject to the oft-delayed 25 per cent tariffs Mr Trump has threatened to use against the southern US neighbour.

According to an analysis from The Perryman Group, a sustained 25 per cent tariff on goods from Mexico would cost Texas $36.4 billion in annual gross product and 287,000 jobs. The same tariff on Canadian goods, meanwhile, would contribute to $9.6 billion in losses on annual gross product and 76,600 jobs.

“Because of the sheer harm that they cause, I do not expect them to be sustained at these levels,” Mr Perryman said.

Mr Trump has so far paused the blanket tariff on Mexican imports, although new levies could come as soon as Tuesday.

And more so than other states because of its proximity to Mexico, Texas also stands to lose more if Mr Trump follows through with his plans to deport immigrants en masse. Undocumented immigrants make up about 8 per cent of the state's workforce, according to a 2023 Pew Research Center report. And losing that would only exacerbate the state's current labour shortage.

“Again, while we are seeing some level of effort in this regard, the campaign rhetoric of deporting all undocumented workers on a sustained basis will not happen, as it would shut down entire major segments of the economy,” Mr Perryman said.