Real estate has a low profile among low-carbon earners on the newly released 2020 Carbon Clean200 list of publicly traded companies that derive at least 10 per cent of their total revenue from products and services tied to a clean economy. Technically, three real estate entities are ranked in this fifth year of the joint analysis from the clean capitalism advocacy organizations, Corporate Knights and As You Sow, but just two of them have conventional commercial real estate portfolios.
Weyerhaeuser Company, a forest products purveyor that owns or controls 12.2 million acres of timberlands in the United States, is categorized as a specialized REIT through its global industry classification standard (GICS) for investment management purposes and defined as a real estate company on the Clean200 list. However, the source of its clean revenue is cited as “FSC (Forest Stewardship Council) and PEFC (Program for the Endorsement of Forest Certification) certified products”. Two Singapore-based companies — City Developments Ltd. and CapitaLand Ltd. — are real estate’s truer representatives in the top 200.
While cautioning that their work should not be viewed as investment advice or recommendations, devisors of the Clean200 list position it as a register of competitive low-carbon investment options. To qualify, companies must boast annual revenue of at least USD $1 billion and be free from 21 identified negative encumbrances.
“In 2016, people were saying: If we divest fossil fuels there is nothing to invest in. We created the Clean200 to show investors around the world that the clean energy future is actually the clean energy present,” explains Andrew Behar, chief executive officer of the U.S. based organization, As You Sow.
Recognized sources of low-carbon revenue include business activities related to: energy efficiency; green energy; electric vehicles; financing low-carbon ventures; low-carbon real estate footprints; environmentally responsible forestry and mining; low-carbon food and apparel production; and information and communications technology aligned with a low-carbon economy. Clean200 sponsors report that designated companies have collectively delivered a 29.58 per cent return on investment since the annual analysis of investment performance was launched in 2016, which significantly surpasses the 6.68 per cent return that companies in the MSCI ACWI Global Energy Index delivered over the same period.
“Investors may finally be breaking up with fossil fuels as capital flows to better growth prospects in clean energy,” submits Toby Heaps, chief executive officer of Canada’s Corporate Knights.
Commentary accompanying the list of this year’s lucrative low-carbon earners identifies Canadian investors as leaders of that trend.
“Many of the biggest investors in the world are selling off their fossil fuel holdings and loading up on green assets. For example, without any fanfare the C$200 billion (USD $150 billion) Ontario Teachers’ Pension Plan (has dialled down its fossil-fuel equity holdings to just 1 per cent. On the upside, the C$306 billion (USD $230 billion) Caisse de dépôt et placement du Québec (CDPQ) has grown its green investment book to C$30 billion (USD $22.5 billion), earning commercial returns along the way, according to outgoing chief executive Michael Sabia,” it states.
GRESB overlap and services promoting high-performance buildings also figure in Clean200
Looking specifically at listed real estate options, City Developments ranked 81st for deriving USD $3.1 billion, or 64 per cent of its total 2018 revenue of USD $4.9 billion, from energy-efficient buildings. CapitaLand Ltd. placed 101st with USD $2.5 billion, or 38.4 per cent, of its USD $6.5 billion in earnings attributed to energy-efficient buildings.
Both companies are also long-term participants in the GRESB global benchmark for the environmental, social and governance (ESG) performance of commercial real estate portfolios. In 2019, CapitaLand was named the global sector leader for listed companies with diversified portfolios, while City Developments was the Asia sector leader for listed companies in the office property category.
Nine Canadian companies are among this year’s Clean200, including two — SNC-Lavalin Group and Stantec — that provide professional services to the real estate industry. Both generate low-carbon revenue from design, consultation services and/or construction and project management of energy-efficient infrastructure and high-performance buildings. Another Canadian Clean200 designee, Cascades Inc., supplies recycled paper products to the property/facilities management sector among other consumer groups.
CN Rail achieved Canada’s top ranking, at 23rd, with nearly 81 per cent of its 2018 revenue attributed to clean sources — cited as “energy-efficient bulk transportation”. That’s more than USD $9.2 billion (CAD $12.2 billion) of USD $11.47 billion (CAD $15.25 billion) in total revenue.
Other ranking Canadian enterprises include CP Rail, Bombardier Inc., Canadian Solar Inc,, Brookfield Renewable Partners and Transcontinental Inc. Meanwhile, Hydro One Ltd. and Fortis Inc. were excluded from contention for failing to meet the Clean200 threshold for utilities to derive at least 50 per cent of revenue from green sources.
The largest share of 2020 Clean200 companies — 39 or 19.5 per cent — are headquartered in the United States, while, in total, 26 nations are represented. With nine, Canada surpasses more populous countries such as Germany, home to seven, and the United Kingdom, home to six. Canada’s tally trails the U.S; Japan, with 28; China, with 27; France, with 13; and Sweden, with 10.