Helping swell the tide of newcomers are companies like Tesla Inc. and Oracle Corp. that relocated to the Lone Star State in recent years, lured by low taxes and relaxed regulations. Texas gained 170,307 net residents from domestic migration last year, US Census data show, more than any state aside from Florida.
Potentially threatening that growth is Republican Governor Greg Abbott’s focus on issues such as gun rights and restricting abortion access, which could deter newcomers from typically liberal hubs like New York or San Francisco from relocating. A slowing US economy and signals by the Federal Reserve that it will keep tightening interest rates to combat inflation could also stall the influx.
“Over a more extended horizon, there is some risk that the non-inclusive and restrictive policies enacted as of late may discourage knowledge workers from locating to Texas,” said Ray Perryman, chief executive officer of the Perryman Group, a Waco-based economic research firm. While his base case is for growth to continue, a slowdown like that “could ripple through the economy.”
For now, though, the population is booming and open space is dwindling. Bass cites Texas A&M research that shows the state loses a square mile of open space to development every day. The result is that Texas has lost rural land at a faster clip than any other state — almost 2.2 million acres in the 20 years through 2017.
With warp-speed development putting renewed importance on the state’s remaining open land, Bass said he sensed an opportunity. Pensions, endowments and other institutions have about $17 trillion that they’re obligated to deploy to investments deemed sustainable or socially responsible. That amount could swell by another $40 trillion or so over the next decade, he said.
Opportunities to invest those ESG dollars are in short supply because of factors ranging from the glacial pace of federal permitting to the nascent development of the ecosystem services industry. Undeveloped land — with its potential to harbor wildlife, mitigate habitat destruction, host carbon storage facilities or develop renewable energy — fits the bill. CEM seeks to get a return on its properties both by generating revenue from eco-minded strategies, like regenerative cattle grazing, and eventually selling.
‘More Mitigation’
Texas’s boom has spawned plenty of projects to offset. The state’s economy is powered by hubs like the Permian Basin (the most prodigious US oil patch) and the sprawl of petrochemical manufacturing facilities along the Gulf Coast, plus its own power grid and the longest stretch of interstate highway.
All the industrial expansion is “going to require much more mitigation,” Bass said. He sees firms that can satisfy corporate ESG mandates benefitting from a never-ending stream of investments.
“Why not institutionalize this business right now?” he said. “We’re charging those that are infringing the most, and they are happy to pay it.”
ESG has come under increasing fire for misleading claims and poor returns. Bass himself recently blamed skyrocketing energy prices in part on world leaders “taking policy cues from NGOs and teenagers.” He acknowledges there’s little regulatory oversight, but said the “bespoke” nature of the market is part of what makes it compelling.