FOREWORD

Corporate Knights and As You Sow have released the annual update of the Clean200 global list of publicly traded companies that are leading the way with solutions for the transition to a clean energy future.

Since our first report was launched in the summer of 2016, a great deal has changed in the world.

Larry Fink, the CEO of the largest investment firm in the world, wrote in his 2022 letter to CEOs:

“It’s been two years since I wrote that climate risk is investment risk. And in that short period, we have seen a tectonic shift of capital. Sustainable investments have now reached $4 trillion. Actions and ambitions towards decarbonization have also increased. This is just the beginning – the tectonic shift towards sustainable investing is still accelerating. Whether it is capital being deployed into new ventures focused on energy innovation, or capital transferring from traditional indexes into more customized portfolios and products, we will see more money in motion. Every company and every industry will be transformed by the transition to a net zero world.”

It is these very companies in 35 countries that make up the Carbon Clean 200.

More than 1,000 companies have now committed to a net-zero-emission target in line with a 1.5°C future, representing US$23 trillion in market capitalization, more than the GDP of the United States.

The Clean200 companies are leading the way by putting sustainability at the heart of their products, services, business models, and investments, helping to move the world onto a more sustainable trajectory.

This year’s Clean200 companies rose to the top of a pool of 8,480 global firms based on rigorous assessment of the amount of revenue each company earns from products and services aligned with the Corporate Knights Clean Economy Taxonomy. They did so while ensuring that their businesses are not fundamentally offside important criteria for socially responsible investors, including being a company flagged by As You Sow’s Invest Your Values platform, which identifies fossil fuels, weapons, private prisons, thermal coal, or having a record of systemically obstructing climate policy.

Key Findings:

Geographically, Europe and the Americas each account for 37.5% of this year’s Clean200, while the remaining 50 companies are headquartered in the Asia Pacific region. The United States dominated the 2022 list, with 52 companies on the Clean200, while Canada had the second largest share with 18, closely followed by China, which 16 Clean200 companies are headquartered in.

On average, 58% of revenues earned by Clean200 companies are classified as clean, which is up from 39% in 2021 and significantly above the 20% average clean revenue for their MSCI ACWI peers.

But none of this would have legs if the Clean200 weren’t also faring well financially. On this score, as of January 31, 2022, the Clean200 has outperformed its MSCI ACWI peers by 3.94% since the Clean200 was launched in July of 2016.

Clean200 companies generated a total return of 107.09%, beating the MSCI ACWI broad market index (103.15%) and MSCI ACWI/Energy Index of fossil fuel companies (31.67%) on Total Return Gross — USD Basis from the Clean200 inception of July 1, 2016, to January 31, 2022.

To put that in context: $10,000 invested in the Clean200 on July 1, 2016, would have grown to $20,709 by January 31, 2022, versus $20,315 for the MSCI ACWI broad market benchmark and $13,167 for the MSCI ACWI/Energy benchmark for fossil fuel companies.

Looking Ahead:

What is needed now is for the rest of the business world, most importantly the big-money investors who have been sitting on the sidelines, to also lean into this form of clean capitalism.

Now that BlackRock, the largest investor in the world, with a whopping US$8.7 trillion under management, has jumped on the net-zero-emissions bandwagon, it is only a matter of time before it becomes the standard, placing a 100% sustainable and zero-carbon economy within our grasp. To date, financial firms have pledged that more than US$130 trillion of assets will be net-zero by 2050.

The good news for our species is that the forces of pride and profit have shifted to support the emerging regenerative economy based on justice and sustainability, leaving the extractive economy to wind down. We will see this escalate as the transition kicks in and every company on the planet reduces emissions by 5% per year over the next decade.

With the sun shining on climate solutions, companies are free at last to shed their carbon cloaks.

With all this action, we hope that the Clean200 can do two things:

1. Provide a useful north star for investors looking to pinpoint the companies leading the way to a clean energy future.
2. Dispel the myth that clean investing is about sacrificing returns.

To make things easier, Corporate Knights and As You Sow are proud to present the latest edition of the Clean200.

While we’re not promising any home runs, we are happy to report that the Clean200 now has more than a five-year track record and is outperforming both the broad-based benchmark and its high-carbon global counterparts.

CLEAN200 PERFORMANCE VS. BENCHMARK

CLEAN200 COMPANIES BY COUNTRY

The post Report: Meet the top 200 companies investing in a clean energy future appeared first on Corporate Knights.

Since our first report was launched in the summer of 2016, a great deal has changed in the world.

Larry Fink, the CEO of the largest investment firm in the world, BlackRock, wrote in his 2021 letter to CEOs:

“Given how central the energy transition will be to every company’s growth prospects, we are asking companies to disclose a plan for how their business model will be compatible with a net zero economy – that is, one where global warming is limited to well below 2°C, consistent with a global aspiration of net zero greenhouse gas emissions by 2050.”

Fink’s sentiment is playing out in real time. The negative impact of climate change across the entire economy, supply chains, capital markets and public health is now well charted, in particular the recent Harvard study showing that deaths related to fossil fuel pollution exceeded eight million in 2018 and are growing.

This year, riding Tesla’s soaring stock, Elon Musk passed Jeff Bezos to become the richest man on the planet, with a net worth of US$189.7 billion (as of January 8, 2021).

In carrying out his mission to accelerate the world’s transition to sustainable energy, Musk has become a prophet for clean capitalism, with Tesla now ranked as the most sustainable and valuable car company in the world. It is also now the pure-play company on the Clean200.

Musk is not alone. The Prince of Wales, the pope and, critically, a global movement catalyzed by Greta Thunberg have all turned up the heat on businesses to get real about cooling the planet.

Prince Charles has long championed the environment and the central role industry and finance must play in its protection, but he’s dialled up the urgency significantly in the past year. In the fall, he said climate change poses such a severe threat that the world’s only option is to adopt a military-style response reminiscent of the U.S. Marshall Plan that helped rebuild post-war Europe 70 years ago.

In January, the prince looked back more than 800 years to the Magna Carta (which inspired a belief in the fundamental rights of people) to issue a companion document – the Terra Carta, or Earth Charter – that aims to enshrine the rights and value of nature in capitalism, inviting the world’s CEOs to make a sustainable future the growth story of our time.

Pope Francis once described unbridled capitalism as the “dung of the devil.” In a sign of the times, he recently gave his blessing to the Council for Inclusive Capitalism, a partnership between the Vatican and the leaders of some of the world’s largest businesses, including the chiefs of BP and Bank of America.

This seemingly unholy alliance seeks to make capitalism a more holy instrument for answering the cry of the earth and the cry of the poor.

There are now more than 300 companies, representing more than US$3.6 trillion in market cap, that have committed to a net-zero-emission target in line with a 1.5°C future.

Some worry these are empty words that give the impression that sufficient action is being taken – a sort of delay tactic. Thunberg, the teenage activist who kicked off a citizens’ climate movement, says, “We must forget about net-zero – we need real zero.”

She spells out what that means:

“Immediately halt all investments in fossil fuel exploration and extraction. Immediately end all fossil fuel subsidies. And immediately and completely divest from fossil fuels. We don’t want these things done by 2050, 2030 or even [next year]. We want this done now.”

She’s right, but defunding carbon bombs will not be enough; not even close. The real action is going all in on funding climate solutions. What gets funded gets done. How we invest our trillions starting right now will determine our future.

To paraphrase Indian philosopher Jiddu Krishnamurti, the climate-solution revolution is today, not tomorrow. The litmus test for companies and countries (and anyone, really) is what percentage of your current budget is allocated with an intention to create a carbon-free sustainable world. If it’s less than 100%, you’ve got work to do.

The Clean200 companies are leading the way by putting sustainability at the heart of their products, services, business models and investments, helping to move the world onto a more sustainable trajectory.

This year’s Clean200 companies rose to the top of a pool of 8,080 global firms that earn more than $1 billion a year, based on rigorous assessment of the amount of revenue each company earns from products and services aligned with the Corporate Knights Clean Economy Taxonomy, while also ensuring that their businesses are not fundamentally offside important criteria for socially responsible investors, including substantial involvement in weapons, private prisons, thermal coal or having a record of systemically obstructing climate policy.

On average, 39% of revenues earned by Clean200 companies are classified as clean, which the majority of other revenues classified as neutral, compared to just 8% clean revenue for their peers.

But none of this would have legs if the Clean200 weren’t also faring well financially. On this score, the Clean200 handily outperformed its MSCI ACWI peers by 47% over the last year (to January 31, 2021) and by 34.74% since the Clean200 was launched in July 2016.

Clean200 companies generated a total return of 113.41%, beating the MSCI ACWI broad market index (78.67%) and MSCI ACWI/Energy Index of fossil fuel companies, (-13.83%) on Total Return Gross – USD Basis from the Clean200 inception of July 1, 2016, to January 31, 2021.

To put that in context: $10,000 invested in the Clean200 on July 1, 2016, would have grown to $21,340 by January 31, 2021, versus $17,867 for the MSCI ACWI broad market benchmark and $8,617 for the MSCI ACWI Energy benchmark for fossil fuel companies.

What is needed now is for the rest of the business world, most importantly the big-money investors who have been sitting on the sidelines, to also lean into this more civilized form of clean capitalism.

Now that BlackRock, the largest investor in the world, with a whopping US$8.7 trillion under management, has jumped the net-zero-emissions bandwagon, it is only a matter of time before it becomes the standard, placing a 100% sustainable and zero-carbon economy within our grasp.

The good news for our species is that the forces of pride and profit have shifted in favour of those on the right side of climate history, with shame and economic shambles awaiting those who cling to the wrong side.

With the sun shining on climate solutions, companies are free at last to shed their carbon cloaks.

With all this action, we hope that the Clean200 can do two things:

1. provide a useful North Star for investors looking to pinpoint the companies leading the way to a clean-energy future.
2. dispel the myth that clean investing is about sacrificing returns.

To make things easier, Corporate Knights and As You Sow are proud to present the latest edition of the Clean200.

While we’re not promising any home runs, we are happy to report that the Clean200 now has more than a four-year track record of outperforming its high-carbon global counterparts.

Clean200 vs. MSCI ACWI vs. ACWI Energy (Jul-01-2016 – Jan-31-2021, Total Return Gross – USD)

Clean 200 Companies by Country

THE CLEAN 200 LIST

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ABOUT THE AUTHORS

ABOUT AS YOU SOW®: Founded in 1992, As You Sow promotes environmental and social corporate responsibility through shareholder advocacy, coalition building and innovative legal strategies. Our efforts create large-scale systemic change by establishing sustainable and equitable corporate practices. As You Sow was founded on the belief that many environmental and human rights issues can be resolved by increased corporate responsibility. As investor representatives, we communicate directly with corporate executives to collaboratively develop and implement business models that reduce risk, benefit brand reputation and protect long-term shareholder value while simultaneously bringing about positive change for the environment and human rights.

The post Introducing the 2021 Carbon Clean200: Investing in a Clean Energy Future appeared first on Corporate Knights.

The Clean200 is intended as the clean energy inverse of the Carbon Underground 200TM. Where the Carbon Underground 200TM (which evolved from the seminal Carbon Tracker Initiative report, Unburnable Carbon: Are the World’s Financial Markets Carrying a Carbon Bubble?), ranks the largest publicly listed companies by the carbon intensity of their coal, oil, and gas reserves; the Clean200 ranks the largest publicly listed companies by their total clean energy revenues, with a few additional screens to help ensure the companies are indeed building the infrastructure and services needed for what Lester Brown and many others have called “The Great Energy Transition” in a just and equitable way.

The moral case for divesting fuels has been well argued, but for many, the economic case is less clear. However, as clean energy growth rates take off and demand growth for fossil fuels flatlines, it is probable that divesting fossil fuels in favour of a clean energy future does not have to come at a sacrifice to long-term investment returns.

On the risk side, divesting is about not getting stuck holding stranded fossil fuel assets that cannot be burnt if the world is to adhere to a given carbon budget, a topic on which Mark Carney, governor of the Bank of England, has expressed concerns in a landmark speech to global insurer Lloyd’s of London. On the opportunity side, investing in the transition from a high-carbon to a low-carbon economy represents “the largest economic opportunity of the 21st century” according to John Doerr a major venture capitalist at Kleiner-Perkins in Silicon valley.

It might seem counter-intuitive for an investor to sell their fossil fuel stocks when most people are still driving internal combustion cars and burning fossil fuels every day. However, the point and the power dynamic of investing is that, as an investor, you have the power to bet on and capitalize the creation of the world that you want to see.

If you are wrong, you will lose money. If you are right, you will profit from and add momentum to the change you believe in. While many mission-driven investors believe that the arc of history bends towards justice – that companies which create positive rather than negative externalities will prevail – in the case of climate friendly investing, it may actually be true. Many investors have found this out the hard way. Indeed, in a world of limited capital every investment has opportunity cost. When people vote with their investment dollars in favour of clean energy over dirty it sends a message as powerful as any ballot box that the time has come to stop using the atmosphere as a free dumping ground.

Take coal, which accounts for over 40 per cent of global greenhouse gas emissions. The industry is declining rapidly in value, especially in the United States, Peabody Energy, the largest private-sector coal company in the world, filed for Chapter 11 bankruptcy protection this April, following Arch and Alpha. The Dow Jones Coal Index dropped 93 per cent over the past five years. Oil companies are facing similar problems. Fifty-two have filed for bankruptcy since 2015, and over a third of the world’s biggest oil and gas companies have crushing debt loads (over $150 billion) and cash flows depressed by low oil prices, according to the Deloitte Center for Energy Solutions and a recent study by As You Sow. Major investment indices are now only half as exposed to the fossil fuel sector (1.5 per cent to coal, 7 per cent to oil and gas) as they were five years ago. This is not due to any active decision to divest, but rather because fossil fuel stocks have lagged while other sectors have produced healthy returns.

While fossil fuel stock performance stagnates, clean energy is taking off. The world is currently adding twice as much clean power capacity as coal, oil, and gas combined, according to Bloomberg New Energy Finance (BNEF). Wind’s market share of power generation has doubled four times in the past 15 years, and solar has doubled seven times. It’s also getting cheaper to make power from wind and solar, thanks to technology, better financing and economies of scale. Increased demand for a technology generally reduces prices, whereas increased demand for a commodity increases prices. This basic calculus has driven the price of a renewable kilowatt of energy ever downward, making the choice of energy an economic one. Companies which make a significant amount of their revenue from environmental solutions now make up 5% of global investment indices; the Clean200 list of companies have a collective value over $1 trillion.

In the next 10 years, McKinsey expects oil demand growth to flatten due to growing fuel efficiencies and competitive technologies such as the electric car. Battery prices fell 35 per cent last year, and electric car sales rose by 60 per cent. By 2022, BNEF estimates electric vehicles will cost the same as their internal combustion counterparts, and if growth continues at the current pace, oil displacement by electric cars will reach 2 million barrels per day by 2023 – the size of the current oil glut and enough to drive global oil prices to record lows. Factoring in autonomous cars and ride-sharing services, electric cars could reach 50 per cent of new car sales by 2040, according to BNEF, 50 times higher than what OPEC is projecting.

None of this portends an imminent conclusion to our fossil fuel age, but it does suggest an end to fossil fuels as a long-term growth market and the beginning of a long run expansion of clean energy demand. This sentiment has been ratified, sanctified, and tallied by the political, moral, and financial bellwethers of our time, from the Paris climate talks (195 countries committed to phase out fossil fuels this century) to the vatican (Pope Francis has made moral invocations to drastically reduce use of fossil fuels in the encyclical Laudato Si’) to the Bank of England (the bank’s governor Mark Carney has warned not to get stuck holding a bag of stranded fossil fuel assets).

Some big investors are already adapting:

• PFZW, the $183 billion Dutch pension fund, has pledged to halve its carbon footprint by 2020 while increasing its investments in climate solutions fourfold.
• CalSTRS recently committed $2.5 billion to a Low-Carbon Index as part of a multifaceted approach to align its portfolio with the market realities emerging from climate change.
• ABP introduced an internal carbon budget for its asset managers in 2015, designed to reduce the CO2 footprint of its portfolio equity holdings by 25 per cent, as well as doubling its €29bn equity holdings in equities providing environmental and social solutions over the next five years.
• AXA divested from all coal holdings (mining companies and electric utilities deriving over 50 per cent of their turnover from coal) in 2015 and committed to triple its green investments by 2020.

Corporate Knights and As You Sow are committed to updating this list on a quarterly basis and ensuring that it remains in the Creative Commons as a public good. We invite anyone to make it better and share any new ideas to improve the methodology for the next quarter. It can be downloaded at www.clean200.org.

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