A wind turbine operated by Dominion Energy off the coast of Virginia Beach, Va. Photo by Julia Rendleman for The Wall Street Journal.
After years of intermittent excitement and fizzled expectations, environmental-oriented investing is no longer just a niche interest
Some of the world’s biggest companies and deepest-pocketed investors are lining up trillions of dollars to finance a shift away from fossil fuels. Assets in investment funds focused partly on the environment reached almost $2 trillion globally in the first quarter, more than tripling in three years. Investors are putting $3 billion a day into these funds. More than $5 billion worth of bonds and loans designed to fund green initiatives are now issued every day. The two biggest U.S. banks pledged $4 trillion in climate-oriented financing over the next decade.
“We’ve reached the tipping point and beyond,” said James Chapman, chief financial officer at Dominion Energy Inc., one of the country’s biggest utilities. Dominion, which has begun issuing green bonds, is planning to spend $26 billion or more on clean energy such as wind and solar in the next five years.
After years of intermittent excitement followed by fizzled expectations, green finance is now looking less like the niche interest of socially conscious investors and more like a sustainable gold rush. Driven by surging valuations for electric-vehicle companies such as Tesla Inc. and startup battery producers, banks and investors are betting the transition from fossil fuels is here to stay, and that they can make money by getting behind it, further entrenching the shift.
Behind the geyser of capital is a confluence of forces. Big money managers see opportunities for substantial profits, and they also worry about financial risks associated with climate change. Many of their clients—giant pension funds and fast-trading young investors alike—want to put their wallets behind projects that aim to curb environmental damage.
Read the full article by Scott Patterson and Amrith Ramkumar of the Wall Street Journal.
William McDonough + Partners’ Apex Plaza will be the tallest timber building on America’s eastern seaboard. Image courtesy of William McDonough + Partners
Removing excess carbon from the atmosphere is a daunting but “very exciting” design challenge, according to sustainable-design guru William McDonough.
Describing climate change as a “design failure,” the American architect and designer said that solving it will involve “hundreds of technologies and systems.”
“It’s a design project needing lots of attention,” McDonough told Dezeen via a video call from his home in Virginia. “It’s very exciting to look at how many ways we can do this, but it’s daunting”.
The root of the problem is what McDonough describes as “fugitive carbon”. This is anthropogenic carbon in the atmosphere that “meets the description of a toxin: it’s the wrong material, wrong place, wrong dose, wrong duration.”
“Climate change is the result of breakdowns in the carbon cycle caused by us,” he wrote in the article, which was echoed in a speech given around the same time at the COP22 climate-change conference in Marrakech. “It is a design failure.”
Carbon is “an innocent element in all this”
He further set out his thinking in a blog post that called for “a new language for carbon“. This categorized carbon into three categories.
“Living carbon” moves through all living things in an endless cycle that makes life possible.
“Durable carbon” describes the earth’s carbon stores, including fossil reserves, limestone and long-lasting materials such as timber and recyclable polymers.
“Fugitive carbon” is carbon that mankind has taken from the first two categories and put into the atmosphere. The twin design challenges are to stop creating more of it while bringing the rest of it back to earth.
“The point I wanted to make there was that we had started referring to carbon as the enemy,” he explained. “It’s an innocent element in all this. I thought we needed a new language.”
“We are probably going to have to electrify everything”
Creating this new taxonomy allowed McDonough to start seeing atmospheric carbon as a design problem that could be solved.
“I see encouraging living carbon as positive behavior; doing carbon-neutral things as neutral behavior; and releasing carbon where it doesn’t as negative behavior,” he explained. “I tried to get the language straight enough so I can design with it.”
One part of the solution is to simply “stop burning… let’s not use the word fossil fuels,” he said. “Because it means we intend to burn it.”
Switching from fossil energy will involve “massive efficiency and massive adoption of renewables. We are probably going to have to electrify everything.”
Hydrogen could be used for heavier uses such as long-distance trucking and heavy industry, he said. Carbon-free ammonia, which has a higher energy density than hydrogen and is less volatile, could power shipping.
Humanity will need to adopt principles of circularity
To stop climate change, humanity will have to adapt the principles of circularity in order to capture fugitive carbon. McDonough describes the goal as the “circular carbon economy”.
This will involve “moving toward recyclates,” McDonough said, referring to materials that are capable of being recycled many times. “There’s going to be a big move to do chemical recycling of plastics to get them back to oil basically and start over. Plastics are an immensely useful thing, but not if they go fugitive.”
Biomaterials such as agricultural byproducts, bacteria and mycelium have huge potential too since they store large amounts of carbon.
“I think it’s fundamental and it’s hugely important,” he said. “It’s critical because we need living wood in order to sequester carbon from the atmosphere. We need nature-based solutions to carbon in the atmosphere. And trees play a huge role in that.”
Mass-timber buildings are “coming very fast”
The use of timber as a construction material is “coming very fast,” he said, with cross-laminated timber, in particular, allowing architects to build high-performance mass-timber buildings, including tall structures.
William McDonough + Partners’ Apex Plaza headquarters for Apex Clean Energy, under construction in Charlottesville, will be the tallest timber building on America’s eastern seaboard when it completes later this year.
The eight-story CLT structure will have “a total potential carbon benefit of approximately 3,000 metric tons compared to traditional approaches,” according to William McDonough + Partners’ website.
Wood “holds up very well in fire too,” he explains. “Some people are surprised by that but wood will char before steel fails. High temperatures can take steel down long before a wood structure.”
Read the full interview with William McDonough by Marcus Fairs of Dezeen, the design and architecture publication based in London and New York.
Striving for something better is a very human thing. Whether it be a better house, better clothes, a better job, it’s our nature to seek a future, which is an improvement upon the current state. The definition of better, of course, can be as unique as the individual. But when you widen the aperture and pose the question, ‘what does a better world look like?’, it forces consideration of the collective.
JLL’s purpose is to shape the future of real estate for a better world. This isn’t a new purpose for JLL, for over 250 years we’ve been at the heart of real estate bringing diverse thinking and perspectives to investors and businesses worldwide. But over the last 18 months we’ve delved deeper into the various dimensions of that statement. The pandemic, for example, resulted in a top-to-bottom evaluation of our role, as a leading real estate and investment management services firm, in contributing to the future of health. But with the built environment accounting for approximately 38% of global energy consumption and 40% of total direct and indirect CO2 emissions, we knew addressing climate change was fundamental to our purpose. For us – and the title of our new Global Sustainability Report 2020 – a better world is a net zero world.
Hence, in May 2021, we took the bold step of committing to net zero carbon by 2040 across all areas of our operations, as well as all the sites we manage for our clients and our extensive global corporate supply chain. Further, we’ll deliver against that goal with no more than 5% offsets, fully abating 95% of our 2018 baseline GHG emissions.
With over 95% of JLL’s emissions coming from our client portfolios, key to our net zero trajectory is helping all our clients with their decarbonization journey. Importantly, many if not most of our clients have their own reduction targets. And, as JLL’s new research, Responsible Real Estate – Decarbonizing the Built Environment shows, the real estate industry has accelerated its focus on responsibility and social purpose, with occupiers and investors making strong commitments to decarbonize and build back better for the future. Coupled with the anticipated growth in carbon regulation, an increasing number of solutions include renewable energy.
In 2020 alone, JLL provided advice on renewable energy projects (either installed or received planning consent) estimated to have averted more than 20,627 metric tons of CO2e. Furthermore, if advised renewable energy projects in the planning and feasibility stages achieve planning consent or successful development, there is the potential to avoid more than 287,919 additional metric tons of CO2e.
One project example is the Washington Metropolitan Area Transit Authority (Metro). Serving the Washington, D.C. region, Metro is the second-largest transit system in the United States. In support of the Clean Energy DC plan to reduce emissions by 56% in 2032 over a baseline year of 2005, Wash. D.C has incentive programs for solar energy projects. Metro saw an opportunity to create a new revenue stream while increasing its impact on regional carbon emissions reductions. They enlisted JLL to help.
The project’s financial viability depended on choosing locations covered by the D.C. solar incentives and where interconnection was feasible. The result was an innovative solution to install 17 acres of solar panels on garage rooftops and parking lot canopies. Upon completion, it will be the largest solar project in the region, generating 12.8 MWh of power that will provide clean energy to approximately 1,500 single-family area homes. At no cost to Metro, the project will provide $50 million in revenue over a 25-year solar power agreement.
This win-win-win project, brought to life in this short film, provides a blueprint for further options to help the Washington region achieve its sustainability goals.
Creative solutions like Metro weren’t possible all that long ago, however. Solar and wind farms are a fairly common sight today. That wasn’t the case a decade ago when the U.S. Department of Energy Loan Program Office (LPO) financed the nation’s first five utility-scale photovoltaic (PV) solar power projects. These landmark projects proved the feasibility of the concept and sparked the development of the commercial market for utility-scale PV solar power. But the story is little known.
LPO had to overcome many challenges to establish the financial, technical, legal, and environmental experience to fulfill its mission. Through American Recovery and Reinvestment Act, the LPO gained $16 billion in capital to lend – within a two-year window. LPO needed to scale its operations to rapidly deploy its available capital in the tight timeline.
They tapped JLL to help develop every aspect of its lending programs, from financial analyses and management, loan structures, and credit policies to risk rating tools, origination practices, and more. The team also helped LPO establish an enterprise risk management framework. With its portfolio rapidly expanding, we supported LPO’s portfolio management operations by implementing a digital management system to streamline workflows.
Since 2010, LPO-financed projects have helped the U.S. avoid more than 60 million metric tons of CO2 emissions. In addition, its auto manufacturing loans have supported production of more than 20 million EVs, and its energy projects have generated 73,473-gigawatt-hours of electricity.
These are just two examples of the dramatic impact creative collaborations can have. Together with our clients we’re committed to drive disruptive, meaningful change at scale. We will continue invest in sustainability services and capabilities across our entire enterprise, building on the strength of our global platform to create a net zero – and indeed better – world.
Article by Cynthia Curtis, Senior VP of sustainability stakeholder engagement for JLL, responsible for elevating JLL’s sustainability program, Building a Better Tomorrow, embedding it broadly throughout the business and driving meaningful impact with and through JLL’s clients. Included in her scope is delivering against JLL’s science-based target of reducing scope 3 emissions from the properties that it manages on behalf of clients. She serves as the company’s representative on the World Green Building Council’s Corporate Advisory Board. Cynthia also collaborates with the Investor Relations team to ensure its investors have a more complete understanding of JLL’s competencies, goals and impacts.
Cynthia serves on the Board of Directors for Greenback Renewable Energy Company, LLC, which is dedicated to investing in projects and managing capital for its public shareholders as well as institutional investors in the sustainable infrastructure sector. Previously, Curtis has worked in the public, private and non-profit sectors, including Ceres and CA Technologies, where she served as vice president and chief sustainability officer. She lives in the Boston area, is a member of the New England Women in Energy and the Environment, chairs the Wellesley Village Church Energy Committee, and built one of the region’s first gold LEED-certified residences.
Clean burning hydrogen fuel is finally coming into its own, and it could shape the future of U.S. energy.
In November 2019, the United States not only became fully energy independent but a net exporter. What a pyrrhic victory, that independence. In September, more than a million people flooded city streets across the globe to demand action on climate change. The most direct action was, and remains, extinguishing the fires that burn over oil and gas drilling sites, everywhere.
Now, given its determined focus on climate change and the danger of fossil fuels, the Biden administration is faced with a conundrum: how to keep the economic and security benefits of American energy independence while drastically lowering carbon emissions — not in a half century, but in a little more than a decade.
The Fossil Fuel Contradiction
The extreme weather crisis that has mauled the Texas power grid offers a stark example of the hurdles the U.S. now faces. Texas oil was already losing value and credibility before the February deep freeze. More broadly, the U.S. oil and gas industry currently accounts for at least 10 million jobs, 8% of GDP, and 6% of total employment. Average annual pay in the oil patch — or the fracking patch — is around $102,000, well above the median household income. Erasing that? Not possible.
At the same time, Climate Joe has a powerful opportunity to engage American oil and gas companies in an emergency dialogue over how to change practices and make the big transition from black emissions to grey emissions. There are ways to phase out fossil fuel emissions without laying off millions or threatening U.S. energy security.
In short, committing to a hydrogen economy would serve both ends.
The Proven Technology
No doubt, hydrogen is controversial. In this case, we’re talking about “brown,” or “grey” hydrogen, produced during the processing, or “reforming” of natural gas in large scale oil refineries and fertilizer manufacturing. According to the U.S. Office of Energy Efficiency and Renewable Energy, 95% of the hydrogen in America is currently made this way, using steam-methane technology, which produces hydrogen from a methane source (eg. natural gas). Methane reacts with steam under pressure in the presence of a catalyst to produce hydrogen. Currently, the world’s largest producer of hydrogen is American industrial conglomerate Air Products, which boasts a largely U.S.-based supply chain.
While steam methane reforming offers a lower emissions pathway, it is not a zero-emission technology. That said, there is considerable research directed at combining carbon capture technology with steam methane reforming units. When it’s done right, the process brings net-zero emissions.
Brown Hydrogen vs. Green Hydrogen
Green hydrogen — which must be made from a proper renewable energy source, is an ideal fuel. When consumed in a fuel cell, it produces only water, electricity and heat. Hydrogen and fuel cells have potential widespread applications including distributed or combined heat and power, backup power, systems for storing and enabling renewable energy, portable power, auxiliary power for trucks, aircraft, rail, ships, specialty vehicles such as forklifts, and passenger and freight vehicles including cars, trucks, and buses. Below is a snapshot from the United States Energy Information Administration estimating hydrogen and fuel cells emission reduction potential:
Light duty highway Vehicles: Between 50% and more than 90% reduction in emissions over today’s gasoline vehicles.
Specialty vehicles: More than 35% reduction in emissions over current diesel and battery-powered lift trucks.
Transit buses: Demonstrated fuel economies of approximately 1.5 times greater than diesel internal combustion engine (ICE) buses and approximately 2 times higher than natural gas ICE buses.
Auxiliary power units (APUs): More than 60% reduction in emissions compared to truck engine idling.
Combined heat and power (CHP) systems: 35% to more than 50% reduction in emissions over conventional heat and power sources.
Time to Repurpose Oil and Gas Pipelines for Hydrogen
For decades, the hydrogen value chain has been constrained by infrastructure challenges. Unlike other alternative energy technologies, the hydrogen economy does not have greenfield infrastructure needs nor requires the development of an entirely new domestic supply chain. The hydrogen economy, just like the oil and gas sector value chain, operates in three segments: upstream, midstream and downstream.
Jason Kontomitras, CEO at Hydroco, says that “the transition towards low emission fuels, like hydrogen, would be a daunting task without the use of existing infrastructure developed for oil and gas. The United States will be able to maintain a strong energy workforce with hydrogen; however, the United States must utilize the capabilities of the oil and gas industry during the energy transition to ensure the continuance of the United States’ energy independence and position as a trailblazer in the energy sector.”
Unlike other alternative energy technologies, the United States has a fully built out domestic supply chain that can be engaged to support the development of the hydrogen economy. One measure that would help: collaboration between the government and the oil and gas industry in redrawing the lines of existing energy infrastructure. In doing this, they should utilize the existing oil and gas workforce.
Reinventing U.S. Shale
Such a course could not be more timely for the oil and gas industry. The proliferation of cheap shale gas flooding domestic markets over the last decade has led to the current down cycle in commodity prices. To make matters worse, COVID-19 has served to bolster this depression in demand and has led to a prolonged period of oversupply. The result is over 40 producers with $51 billion in debt entering bankruptcy protection over the course of 2020. Early estimates place the total number of oil and gas jobs lost at over 107,000. This displacement of the traditional energy workforce presents a unique opportunity for the expedition of a hydrogen economy.
“Though different technologies, many of the competencies required for successful implementation of hydrogen-specific infrastructure mirror those required in oil and gas,” explains Stephen Brooks, director of engineering at Lone Cypress Energy Services. “The hydrogen supply chain is governed by the same technical and logistical challenges faced by the midstream oil and gas industry.”
From a technical perspective, the required mechanical-, chemical- and construction-specific engineering rely upon the same industry standards and practices. Transportation logistics are also similar, as hydrogen is either trucked or pipelined from the point of generation to the point of consumption much like natural gas or crude oil. This presents an opportunity for thousands of engineers, petroleum landmen and pipeline construction workers to enter an emerging industry as the traditional energy landscape undergoes this drastic transformation. Unlike other renewable technologies, such as solar and wind, hydrogen infrastructure offers a direct translation of existing skill sets.
Article by Nicholaus Rohleder, the co-founder and environmental technology portfolio manager at New American Energy, an environmental technology asset manager. In addition to this, Nicholaus serves as an independent director at BioHiTech Global, a senior advisor at Ardour Capital, and finance director at Lone Cypress Energy.
There’s renewed commitment from companies and organizations to run their business and operations in more sustainable ways. As communities and consumers begin to demand more from organizations to do more to support their communities, many are not only including sustainability in corporate social responsibility plans but are also are setting ambitious goals to reduce their impacts on the environment. And they’re making real strides in achieving these goals.
For over 25 years, The U.S. Green Building Council (USGBC) has supported its members – which include corporations, small businesses, government entities and nonprofits – to achieve their green building goals through its Leadership in Energy and Environmental Design (LEED) program. LEED is the world’s most widely used green building rating system and promotes the use of strategies that reduce environmental impact, enhance human health and support economic development. Currently, there are over 102,000 LEED certified projects across nearly 180 countries and territories.
USGBC continues to evolve LEED, adapting the program based on public feedback and the latest in green building innovation. Today’s version, LEED v4.1, raises the bar on building standards to address energy efficiency, water conservation, site selection, material selection, day lighting and waste reduction. LEED prioritizes sustainable materials, helping manufacturers to design, produce and deliver building materials that reduce a building’s environmental impact.
Companies and organizations are seeing the benefits of adopting LEED certification into their sustainability plans. With LEED, certified buildings are consuming fewer resources, reducing operating costs, increasing value and creating safer and healthier environments for its occupants.
But the newest version of LEED goes beyond design and construction of the building and takes into consideration the building’s most important asset – thepeople living, working and using these buildings. In fact, LEED v4.1 supports projects to implement sustainable and healthy building practices to realize environmental, economic, social and community benefits for decades to come. The specific focus on social equity ensures that buildings are not considered in isolation of their communities but prioritize access and inclusiveness for all and ensures buildings are resilient from natural and unnatural disturbances.
Rethinking our Environments
Over the last year, we all had to rethink the environments in which we live and work. USGBC also reflected on the events of 2020 and in response launched its Healthy Economy Strategy, a path for how healthy places and LEED will support recovery efforts as businesses, governments and communities prepare for a post-pandemic world.
To support its members as business and workplaces reopen in the midst of the COVID-19 pandemic, USGBC released the six LEED Safety First Pilot Credits. These credits outline sustainable best practices related to cleaning and disinfecting, workplace reoccupancy, HVAC and plumbing operations, social equity as well as pandemic preparedness and response and support project teams working toward reentry and safe operation.
More than 150 projects have started using the LEED Safety First pilot credits, such as Miron Construction, a century-old private company. It is using the credits in its Madison, Milwaukee, and Green Bay offices, for which it is pursuing LEED Silver certification, and is also implementing them in its LEED-certified offices in Neenah, Wisconsin and Cedar Rapids, Iowa.
The credits will continue to evolve as more communities re-open and as science and information are updated. The LEED Safety First Pilot Credits were designed to be agile so USGBC can update them as we learn more about the virus that causes COVID-19, while also incorporating membership feedback and best practices.
The Race to Net Zero
We’re also seeing companies make commitments to become carbon neutral as the threat of climate change continues to become more prevalent in our everyday lives. Building and construction account for 39 percent of the carbon emissions in the world, according to the World Green Building Council, and the use of energy and water in buildings emits 28 percent of emissions.
The wider green building community is taking notice and setting its sights squarely on zero. Industry groups like Architecture 2030 created the 2030 Challenge back in 2006, and the engineering arm of the building industry issued its own call to zero in the Structural Engineers 2050 Commitment Program (“SE2050”).
USGBC developed LEED Zero, a complement to LEED that verifies the achievement of net zero goals. LEED Zero Carbon recognizes buildings or spaces operating with net zero carbon emissions from energy consumption and occupant transportation to carbon emissions avoided or offset over a period of 12 months. Projects can earn certification in LEED Zero Carbon, LEED Zero Energy, LEED Zero Water and LEED Zero Waste.
And we’re seeing more and more decision-makers ranging from state governments to major corporations pledging to go net zero or net positive. Some of the first LEED Zero certified projects include Entegrity Partners in Arkansas, Discovery Elementary School in Virginia, and even the Curitiba headquarters of Brazilian engineering and green building consulting firm Petinelli.
Corporations are also being recognized for their efforts in taking these pledges and turning them into action. During the 2021 USGBC Live conference in June, Colgate-Palmolive’s Burlington, N.J., facility was recognized for becoming the first site in the world to achieve LEED Zero certification in all four LEED Zero categories.
For decades, the green building industry has demonstrated how sustainable practices are not just beneficial for the environment but also shown how adopting these measures can improve the efficiency and costs effectiveness of an organization’s operations. It’s an exciting time for the building sector. As more groups adopt these measures, the industry will continue to push the envelope, creating innovative ways to build in a smarter and more sustainable way. USGBC will continue to evolve LEED and provide tools to support the industry.
Article by Deisy Verdinez, who supports the US Green Building Council’s communications efforts, working with media and partners to amplify USGBC’s message. Deisy have more than a decade of media and communications experience and has worked with prominent international organizations, nonprofits and federal government agencies.
Ecofin is a sustainable investment firm that’s passionate about striving to deliver strong risk-adjusted returns while making a true impact on the environment and society.
Our roots date to the 1990s as a London-based boutique advisory firm focused on water and energy infrastructure. In the early 2000s, Ecofin began managing money as a utility-focused investment manager and by the end of the decade, was awarded an environment-related mandate from a large Scandinavian sovereign wealth fund.
In 2018, we sought a partner to help fuel our growth, including in the US. We ended up merging with Tortoise, an essential asset investment firm, which had begun shifting its strategic focus to sustainability in 2016. What we found was a shared vision that sustainable investing does not compromise performance to make an impact. Moreover, we shared a view that we are experiencing a sustainability revolution with decades of growth ahead of us, along with exponential impact to the environment, society and in communities.
When we joined Tortoise in 2018, we retained the Ecofin brand as a platform for our products, which now includes all of our sustainability-oriented strategies. Today, Ecofin is the result of a deliberate process between 2016 and 2018 to bring together experts and world-class investors with decades of experience in sustainable investing. Our team invests in both private and public market strategies across the following major themes: climate action, water and social impact.
What makes us different and is the source of our strength, is our talented team. This is demonstrated in our performance and in our perspectives on the future, which aligns with our devotion to the sustainability revolution and our commitment to investments that help solve pressing global challenges, while creating compounding wealth opportunities for our clients.
What We Do
We are a sustainable specialist dedicated to climate action, social impact and water.
First, climate action is the drive to reduce emissions, and includes both the energy transition and waste transition. This means conventional categories such as solar, wind, hydro and batteries, in addition to the electrification of transport, energy efficiency, waste-to-value (recycling) and waste-to-energy (cleaner fuels such as renewable natural gas).
Second, our investments in social impact focus on providing access to quality education, particularly the underserved population, as well as affordable housing and equal access to healthcare and sustainable communities.
Third, our water investments endeavor to help provide access to clean water and improve water scarcity and sanitation.
Across all themes, we focus on companies and assets that we believe provide investors with the opportunity to compound wealth and preserve capital, while providing a social good.
Why We Do It
Some of the world’s most pressing challenges have been given newfound attention. The devotion to these issues is the bedrock of the Sustainability Revolution. These are long-term secular themes and structural changes occurring on a global scale. We believe we are in the early stages of a multi-decade tectonic shift. The consequences of these changes are shifts in how we make basic decisions, how we consume resources and how we live on the planet. The shift in behavior is also re-shaping the investment landscape.
After decades of debate and procrastination, in our view, it is now clear these forces of change are irreversible and here to stay, strengthened by demands from multiple generations. The power of these forces makes sustainable investing a GARP-like strategy (Growth At a Reasonable Price), and in some cases, tech-like, in which companies’ growth potentials and valuations are misunderstood. They have aggressive growth prospects where value is not appreciated.
Addressing societal and environmental challenges can be a highly profitable business. This is part of the conscious capitalism philosophy that businesses should operate ethically while pursuing profits. Many companies are growing their top and bottom lines and benefitting from rapidly improving growth prospects, multiple expansion and lower cost of debt. Moreover, the expanding pool of ESG capital is bringing greater awareness and receptivity to their stocks. In addition, we think these companies will have better access to talent, and be less exposed to certain regulatory risks and the risks posed by environmental and social variables. The companies that are dedicated to sustainable practices – and providing transparency – have been attracting lower costs of capital and experiencing the early stages of a “sustainability premium”.
Key Drivers of Growth
Three key bills are before Congress that could have a significant impact on the energy sector: The Build Back Better, Green and Clean Future Acts. Of course, others may well emerge. One of the biggest objectives of the Biden administration is to commit America to a Zero Net Carbon goal by 2050 and to attach some meaningful near-term targets and opportunities to achieve that. Specifically the White House wants 100 percent decarbonization of the utility system by 2035.
These bills will undoubtedly take multiple twists and turns, but with control of the White House and Congress we think it is highly likely some form of these bills will pass. Wealth creation with adding new sources of energy to the system over the past 100 plus years has been bigger than you can calculate. But it was all carbon. Now we’re decarbonizing and we have options because of technology. We have the will because people, governments and corporations know it’s worth their time.
Looking to the Future
The case for a return-oriented approach to sustainable investing has become clear. The impact of addressing sustainable issues, from climate change to racial and social justice, has become a compelling investment case and, just as important, not factoring these issues represents an investment risk. Societies desire to accelerate the transformation to greener, decarbonized and more sustainable economies. These powerful and secular forces can generate substantial wealth creation and compelling risk-adjusted investment opportunities for both companies and investors for the many decades to come. Ecofin is up for the challenge of striving to deliver strong risk-adjusted returns to investors, while also making a positive impact on society.
Article by Brent Newcomb, President of Ecofin. Mr. Newcomb joined the firm in 2014 and is a member of the Executive Committee and Ecofin Development Committee and serves as President of Ecofin. He is a member of investment committees for various Ecofin investment strategies as well as Tortoise Essential Assets Income Term Fund. Previously, Mr. Newcomb worked for GCM Grosvenor where he focused on portfolio management. He earned a Bachelor of Science degree in business administration from the University of Kansas and a Master of Business Administration degree from the University of Chicago Booth School Of Business.
Kilroy Realty’s Columbia Square Residence Tower: First apartment rental project to achieve WELL Multifamily Residential Certification
For health and wellbeing in buildings, a wellness certification for a building was a luxury a year ago. Now some consider it a must have, and a way to encourage workers back to the office.
We humans typically spend 90 percent of our time indoors. Perhaps that’s why many us are somewhat complacent about buildings. We generally assume they are safe places to be. The pandemic changed all that. Suddenly, our attention is on whether our immediate environs can make us sick. We are asking questions about air quality, surface cleanliness, and even elevator capacity.
We have known buildings can make people sick for quite some time. The World Health Organization (WHO) coined the term Sick Building Syndrome or SBS in 1986. SBS occurs when occupants experience headaches, allergy-like symptoms, or feel dizzy after spending time indoors. Poorly maintained office buildings are estimated to impact 20 percent of workers. Improvements to air quality, reductions in air pollutants, and better ventilation can reduce symptoms by 70 percent.
SBS is not just a ventilation issue. A building’s stored supply of fresh water can reach unsafe levels of bacteria if the water system is not well maintained, leading to illness and even Legionnaire’s disease.1 Professor Joe Allen’s book, Healthy Buildings, identifies the nine foundations of a healthy building — ventilation, air quality, health, moisture, dust and pests, safety and security, water quality, noise, lighting and views. They are derived from 40 years of scientific evidence on the factors that drive better health and performance for a buildings’ occupants.
People, Planet, or Profit?
Buildings consume 40 percent of global energy and create 30 percent of global energy-related greenhouse gas emissions.2 Being the energy hogs that they are, it was perhaps logical for the early focus of ESG investors to be on energy use reduction. It was also an easy return on investment. Reduce the energy use, reduce the utility bill. That’s good for the planet, and good for profit too. But what about the people?
A healthy workforce is a more profitable one. Healthier workplaces see less employee absenteeism, less sick days, and less employee turnover. Improving workspaces so people are more productive isn’t as easy as changing an incandescent light bulb to LED. But it’s not as hard as we might imagine.
The 3-30-300 rule
This rule of thumb describes a company’s costs for utilities, rent and payroll — all measured per square foot, per year.
A company renting office space for $30 a square foot can typically expect the utility bill to be a tenth of that, or $3. The payroll for the employees occupying that space is on the order of $300 per square foot.
Where then to focus effort?
10% saving on utilities nets 30 cents.
10% drop in rent saves 3 dollars.
10% boost in worker productivity adds $30 dollars of value.
Companies are now beginning to focus more on the potential gains from investing in worker productivity.
The World Green Building Council published reports in 20143 and 20164 that summarize the dozens of studies that link sustainable workplace design to employee health, well-being and productivity. Case studies highlight the increases in productivity from various improvements:
Individual temperature control: +3%
Improved ventilation: +11%
Better lighting: +23%
Access to natural environment: +18%
WELL and Fitwel Building Certifications
Traditional green building certifications like LEED and BREEAM have been around for over 25 years with a primary objective to reduce environmental impacts. WELL and Fitwel are newer certifications—both less than ten years old—that focus on occupant health and well-being. Both certifications complement the requirements in a LEED or BREEAM certification, but include more health-focused requirements such as active workstations, proper lighting, low VOC materials, and layouts that promote worker interaction and even hydration. The Fitwel certification process is less onerous than the WELL version — it is both cheaper and an easier to attain. The WELL certification requires on-site verification and is more globally recognized. Building owners pursue the different certifications for different types of projects.
In June 2020 the International WELL Building Institute (IWBI), administrator of the WELL certification, created the specialized WELL Health-Safety rating in response to the COVID-19 crisis. Just 9 months later, over one billion square feet of space had enrolled to be rated. The rapid adoption of this safety rating illustrates how companies are committing to healthier spaces all around the world.
Investing in Health and Well-Being
Forward-thinking real estate companies are investing in upgrades and certifications to make their buildings more attractive to tenants looking for health and wellness. They are banking on employers choosing healthier spaces for their next office lease, and that residents will be looking for these features in their living spaces. Leaders include:
Empire State Realty5, owner 10 million square feet of rentable space across 14 office properties including the iconic Empire State Building, is the first commercial portfolio in the US to achieve the WELL Health-Safety rating across its entire portfolio. They have also Fitwel certified 6 of their NYC properties to date.
Kilroy Realty6 owns 55 properties up and down the West Coast and have more Fitwel certified projects than any other firm in the world, totaling over 43% of their portfolio. They also achieved the world’s first Well certification of a residential rental project, for Columbia Square in Hollywood, CA.
Dream Office REIT7 in Canada, has earned the WELL Health-Safety rating for 25 of its buildings, representing 87% of their gross leasable space.
Australia’s Charter Hall Group8 was one of the first organizations in the world to achieve a WELL Portfolio Score by certifying properties across their organization.
“Fitwel Champions” are companies using Fitwel at a portfolio scale. Real Estate Investment Trusts (REITs) making the grade include Alexandria Real Estate Equities9, Boston Properties10, Vornado11, and AvalonBay12.
The Covid-19 crisis has focused the attention of ESG investors on the S pillar (social) more so than ever before. The green building movement is routinely classified under the environment pillar because of the attention paid to energy efficiency. While green building certifications always required health and safety for occupants, the emergence of these new specialized wellness ratings demonstrate the elevation of S toward equal partner in the E, S, and G triumvirate.
Article by Sam Adams, CEO and co-founderof Vert Asset Management. He also chairs the Investment Research Group. Sam leads the development of new products to help make sustainable investing easier for investors. He has been a featured speaker on sustainable investing at financial advisor conferences in the US, UK, Europe, and Australia. Prior to launching Vert, Sam spent almost 20 years working at Dimensional Fund Advisors. He started Dimensional’s European Financial Advisor Services business and led it for 10 years. Sam was part of the team that created Dimensional’s first ESG strategies, the Sustainability Core funds that are offered in the US. He also led the development and launch of Dimensional’s Global Sustainability Core Fund in Europe.
Sam has a BA in Philosophy from the University of Colorado, Boulder and an MBA in Finance from the University of California, Davis. Sam is an avid mountaineer and cyclist, and is very passionate about the environment. He lives in Mill Valley, CA with his wife and three children.
Footnotes and Sources:
 Centers for Disease Control and Prevention (2021). Legionella. Retrieved from: https://www.cdc.gov/legionella/about/causes-transmission.html
 United Nations Environmental Programme (2015). The Sustainable Buildings and Construction Programme.
 World Green Building Council (2014). Health, Wellbeing & Productivity in Offices: The Next Chapter.
 World Green Building Council (2016). Building the Business Case: Health, Wellbeing and Productivity in the Green Offices.
 Empire State Realty is 0.18% of the Vert Global Sustainable Real Estate Fund (VGSRX) as of March 31, 2021.
 Kilroy Realty is 0.78% of the Vert Global Sustainable Real Estate Fund (VGSRX) as of March 31, 2021.
 Dream Office REIT is 0.04% of the Vert Global Sustainable Real Estate Fund (VGSRX) as of March 31, 2021.
 Charter Hall Group REIT is 0.16% of the Vert Global Sustainable Real Estate Fund (VGSRX) as of March 31, 2021.
 Alexandria Real Estate Equities is 3.57% of the Vert Global Sustainable Real Estate Fund (VGSRX) as of March 31, 2021.
 Boston Properties is 1.80% of the Vert Global Sustainable Real Estate Fund (VGSRX) as of March 31, 2021.
 Vornado is 0.85% of the Vert Global Sustainable Real Estate Fund (VGSRX) as of March 31, 2021.
 AvalonBay Communities is 3.02% of the Vert Global Sustainable Real Estate Fund (VGSRX) as of March 31, 2021.
The Vert Global Sustainable Real Estate Fund only holds publicly traded REITs. Fund holdings and sectors are subject to change at any time and should not be considered a recommendation to buy or sell any security.
Mutual fund investments involve risk. Principal loss is possible. Investors should be aware of the risks involved with investing in a fund concentrating in REITs and real estate securities, such as declines in the value of real estate and increased susceptibility to adverse economic or regulatory developments. Investments in foreign securities involve political, economic and currency risks, greater volatility and differences in accounting methods. A REIT’s share price may decline because of adverse developments affecting the real estate industry. REITs may be subject to special tax rules and may not qualify for favorable federal tax treatment, which could have adverse tax consequences. The Fund’s focus on sustainability may limit the number of investment opportunities available to the fund and at time the fund may under perform funds that are not subject to similar investment considerations.
The Vert Global Sustainable Real Estate Fund’s investment objectives, risks, charges, and expenses must be considered carefully before investing. The statutory and summary prospectuses contain this and other important information about the investment company, and may be obtained by calling 1-844-740-VERT or visiting www.vertfunds.com . Read carefully before investing.
The Vert Global Sustainable Real Estate Fund is distributed by Quasar Distributors, LLC.
(above) The Howard Family and their solar PV system
In 2017, Clean Energy Credit Union (“Clean Energy CU”) received its federal charter and became the first “thematic,” online-only, federally insured depository institution with an exclusive focus on clean energy lending. Since then, Clean Energy CU has experienced tremendous success and is influencing both the banking and clean energy sectors. To say that “the time was right” for Clean Energy CU would be an understatement. Understanding its right-out-of-the-gate success requires a look at the underlying market conditions that necessitated its launch.
In the early 2000s, growth in the clean energy sector was driven by improvements in costs, technological innovation, government policy, and public opinion. This growth, however, was outpacing the availability of financing that many consumers and homeowners needed to pursue their clean energy projects. For example, upfront costs for residential solar electric systems, residential geothermal systems, and other green home improvements would typically land in the $10,000 to $50,000 range.
Of the 5,000+ credit unions and 5,000+ banks in the USA, only a handful were paying any attention to the sector. As a result, consumer financing options were typically limited to, and dominated by, VC-backed “fintech” companies such as Mosaic, Sungage Financial, and Dividend Finance, resulting in a dearth of competition to drive down borrowing costs. In contrast, all other segments of the clean energy value chain were laser-focused on reducing costs as rapidly as possible. Financing was the weak link that needed to catch up, and the cheapest form of consumer financing generally comes from federally insured depository institutions (i.e. banks and credit unions), so their entrance into the sector was sorely needed.
Against the backdrop of the clean energy economy were burgeoning concepts like impact investing, conscientious consumerism, and purposeful careers. In that evolving, impact-economy landscape, the need for an “impact banking” or “sustainable banking” option was plain to see. Even so, there were a surprisingly limited number of options for consumers to choose from such as Self-Help Credit Union, Amalgamated Bank, and Beneficial State Bank. Widespread awareness had yet to be raised that where you deposit your money was as important as how you earned, invested, and spent it.
By 2014, there was high, unmet demand for affordable clean energy loans juxtaposed with the dire needed to spark an “impact banking” movement. It was then that a group of volunteers, comprised mostly of clean energy professionals and cooperative enthusiasts, convened to address these needs. Upon learning that credit unions are, by definition, not-for-profit and member-owned cooperatives, they saw that the path forward was not actually a stockholder-beholden bank model whose mission would be subordinated to profit-maximization motives, but rather what would become Clean Energy CU.
The operating model is built entirely around the belief that everyone should be able to participate in the clean energy movement—whether as a user, an investor/depositor, or both. Clean Energy CU offers a much-needed value proposition: member deposits will earn a competitive interest rate, be federally insured, and be used exclusively to help others pursue their clean energy or energy-saving projects via market-leading, custom-tailored loan terms.
In early 2018, after a three-year federal charter application process, Clean Energy CU opened its virtual doors. As a federally chartered credit union, it is tax exempt and deposits are federally insured, thereby giving it the lowest possible cost of capital. As a cooperative, it is democratically owned and governed by its members, and the primary reason for its existence is to serve its mission and members. An online/mobile-only services platform eliminates the need for expensive brick-and-mortar branches – and their associated overhead – and helps lower operating costs. Its focus on clean energy lending enables critically important market expertise, awareness, and adaptability.
Services were initially limited to savings accounts, clean energy CDs, and an array of clean energy loan products (e.g. e-bikes, EVs, solar electric systems, and geothermal systems). Philanthropic support that included a $1M grant from the William and Flora Hewlett Foundation in 2019 provided a substantial springboard. To date, over 4,500 clean energy loans totaling over $70M have been funded for members throughout the country without a single delinquency or default. Clean Energy CU continues to grow rapidly, and its services now include checking accounts, debit cards, IRAs, and Money Market accounts. Next, Clean Energy CU is planning to offer green home mortgages, credit cards, and clean energy loans to businesses and nonprofits.
Clean Energy CU is also helping 45+ other credit unions learn about clean energy lending via “loan participations.” By selling portions of its loan pools to other credit unions, Clean Energy CU is able to lend far beyond what its start-up balance sheet would allow. Participating credit unions are able to invest their excess cash, diversify their loan portfolios, and gain experience with an exciting new asset class. Seeing firsthand how well these loans perform on their own books helps other credit unions to convince their own boards and regulators that clean energy loans are more valuable and less risky than previously thought, partly because they inherently save borrowers money (e.g. in the form of lower utility bills and fuel costs) which then increases the borrower’s ability and motivation to make their loan payments. In turn, this encourages more credit unions to do their own clean energy lending, thereby spurring competition and driving down financing costs to fund the rapidly growing clean energy movement.
Importantly, Clean Energy CU is committed to JEDI (Justice, Equity, Diversity, and Inclusion). With over half of its members from low-income census tracts, the National Credit Union Administration recognized it as a “low-income designated credit union” in 2020. Loan programs are under development to favor underserved demographics by offering discounted loan terms to low-to-moderate income borrowers and prioritizing both BIPOC populations and those vulnerable to pollution. As a precursor to these new loan programs, Clean Energy CU recently announced a new program with fellow cooperative, Organic Valley, to offer discounted loan terms to help its membership of organic family farms use clean energy, save energy, and save money.
Clean Energy CU may be the first of its kind, but it won’t be the last. New fintech companies and banks with similar goals are popping up like Aspiration, Climate First Bank, and Atmos. Clean Energy CU aims to help grow the clean energy movement and disrupt the entire retail banking sector which is receiving increased pressure to stop its fossil fuel lending and help finance climate change mitigation. With all that it has achieved in just its first three years of operation, we’re incredibly excited about what Clean Energy CU will accomplish next.
Our indispensable sustainability and stakeholder trend tracker
Each Spring, we publish the Force for Good Forecast, our team’s signature annual report. We do so to help corporate leaders navigate and lead on the year’s most notable social and environmental advocacy trends.
It’s the kind of report you’d usually find behind a paywall, but we provide it for free. Why? When we launched this report a decade ago, we saw a need to elevate corporate awareness of stakeholder engagement and embed it across a company’s business functions. We knew then that it was more than a “nice to have.” Today, it is critical to business success. Plus, it’s a concrete way for us to advance our mission of building trust between unusual allies––like business leaders, activists, and philanthropists––to advance business as a force for good.
Here’s a taste of this year’s lineup:
Resources Shift to Racial Justice A rising group of activists are gaining influence, attracting funding, and changing the environmental movement’s expectations.
The Renewed Urgency for Biodiversity Companies and governments have repeatedly fallen short on protecting flora and fauna. Will this time be different?
Will Chemical Recycling Get Cancelled? Industry is banking on it to close the loop but activists aren’t buying the hype. Can a solution be reached before the technology is thrown to the curb?
Standardizing ESG Disclosures Mandatory climate risk disclosures are on the horizon. This is the year to ensure they work for you.
Building Electrification With the transportation rapidly decarbonizing, advocates are turning their attention to another major fossil fuel guzzler: homes and offices.
Reckoning With a K-Shaped Recovery Income inequality was a simmering issue long before “social distancing” entered our vocabulary. Will the pandemic make it stakeholder capitalism’s first proving ground?
What is Net Zero, Really? Even heavy emitters are committing to balance their carbon budget. But stakeholders want to know how you’ll decarbonize before they offer applause.
From Community Relief to Resilience As compounding crises begin to outstrip local capacity, advocates increasingly expect companies to help fill the void.
Can Companies Help Rescue Democracy? Escalating political polarization is unraveling democracy. CEOs are speaking up like never before, and stakeholders are taking note.
Future 500 has taken our best shot at these trends, but we don’t always call them right. As always, we welcome your feedback. To stay engaged with our work as we provide further analysis into these critical issues, check out our Corporate Affinity Network, or subscribe to our newsletter for regular insights from the Future 500 team.
Future 500 is a non-profit consultancy that builds trust between companies, advocates, investors, and philanthropists to advance business as a force for good. Based in San Francisco, we specialize in stakeholder engagement, sustainability strategy, and responsible communication. From stakeholder mapping to materiality assessments, partnership development to activist engagement, target setting to CSR reporting strategy, we empower our partners with the skills and relationships needed to systemically tackle today’s most pressing environmental, social, and governance (ESG) challenges. Want to learn more? Reach out any time.
Loan finances community-based solar for nonprofits, municipalities and businesses
Clean energy investment firm Sunwealth recently announced a $2.9 million loan from Calvert Impact Capital to support Sunwealth’s solar access work. Sunwealth will use Calvert Impact Capital’s financing, together with $4.3 million in tax equity investment from private investors, to support 18 solar projects on the rooftops and parking lots of nonprofit organizations, multi-family apartment buildings, houses of worship and commercial office buildings in communities underserved by traditional renewable energy financing. These community-based solar projects will generate enough electricity to power over 300 homes annually, and will provide Sunwealth’s solar customers with $3.8 million in lifetime energy savings. Calvert Impact Capital’s loan will also help catalyze additional investment in Sunwealth’s innovative solar financing model.
Sunwealth brings critical capital to the commercial solar market – supporting solar projects ranging in size from 5 kilowatts to 1 megawatt on building rooftops and parking lots. The company partners with local solar developers and installers to design and construct these projects, which deliver solar access and long-term, meaningful energy savings to building owners and to low- and moderate-income households through community shared solar agreements. Sunwealth helps investors like Calvert Impact Capital put their money to work in these community-based projects, building portfolios that contribute to a more diverse and inclusive solar economy while delivering strong, stable and predictable financial returns.
Calvert Impact Capital’s loan supported projects across five states, including:
A 37-kilowatt installation on the rooftop of a multifamily apartment building owned by Fifth Avenue Committee (FAC), a nonprofit community development corporation in Brooklyn, NY. This system, installed by Solar Energy Systems, will allow FAC to provide building tenants with $240 in annual savings
Two rooftop solar installations totaling 204 kilowatts for the YMCA of Greater Hartford. These systems, installed by Greenskies Renewable Energy, will provide the nonprofit organization with close to $400,000 in lifetime energy savings.
A 340-kilowatt system on the roof of Auburn High School, in Auburn, MA. Installed by ACE Solar, this system will provide the school district with $682,000 in lifetime energy savings.
“Investors are looking for proactive solutions to climate change and inequality, two of the most pressing challenges of our time,” said Kevin Fanfoni, Director of Investments at Calvert Impact Capital. “Sunwealth’s model offers both: reducing carbon emissions and delivering solar access and savings to underserved markets, while supporting green jobs and revenues for local small businesses. We’re proud to partner with them to build a more equitable and inclusive renewable energy future.”
“For over a generation, Calvert Impact Capital has helped make impact ‘investable,’” said Jon Abe, CEO of Sunwealth. “They’ve set the standard for investments that deliver social and environmental as well as financial returns – and made those returns accessible to all investors. They’re a key partner as we look to decarbonize, decentralize and democratize our clean energy economy.”
Calvert Impact Capital would also like to thank their pro-bono counsel Jonathan Wilcon and Fannie Law at Morgan, Lewis & Bockius LLP for their dedication and support on this transaction.
Sunwealth is a clean energy investment firm working to change who has access to renewable energy by changing the way we invest in it. Combining deep experience in solar development and finance with roots in community and impact investing, Sunwealth invests in diverse commercial solar projects delivering clean energy and energy savings to communities while providing strong financial returns to investors and community partners. Since 2014, the company has invested over $50 million in more than 400 community-based solar projects nationwide; the company has delivered targeted returns to investors for 25 quarters with no defaults. In 2021, Impact Assets named Sunwealth to its IA50, a leading list of impact fund managers.
About Calvert Impact Capital
Calvert Impact Capital invests to create a more equitable and sustainable world. Through their products and services, Calvert Impact Capital raises capital from individual and institutional investors to finance intermediaries and funds that are investing in communities left out of traditional capital markets. During its 25-year history, Calvert Impact Capital has mobilized over $2 billion of investor capital. Calvert Impact Capital also offers loan syndications, where they originate, structure, and administer loans for institutional and accredited lenders seeking environmental and social impact. To date, Calvert Impact Capital has syndicated and/or administered more than $300 million of capital for impact-oriented transactions.
Under no circumstances is the information contained herein to be considered an offer to sell or a solicitation of an offer to buy any financial product. Investments are offered only via definitive transaction documents and any potential investor should read such documents carefully, including all the risk factors relating to the investment, before investing.