Illustration: Rachel Iderda. Source: Lumos Clean Energy Advisors

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For years, small investors measured their portfolios’ performance by little more than day-to-day swings in share prices. Far too many entrusted those portfolios to conflicted financial advisors, and relied on friends for hot tips.

Times have changed. Millions of retail investors – though by no means all – have come to appreciate that the dartboard approach invariably produces poorer returns than a basket of reputable stocks held year in and year out. Many now take the time to compare fees charged by mutual funds and exchange-traded funds (ETFs) and to ask questions about financial advisors’ independence, and their fees.

Much of the credit for this shift goes to John Bogle, founder and for many years chairman and chief executive of Vanguard Group, the U.S.’s biggest mutual fund distributor. Bogle died in January at age 89. His obituaries were filled with such accolades as “champion of the small investor” and “a pioneer of low-cost investing.”

The title of one of Bogle’s books – The Clash of the Cultures: Investment vs. Speculation – sums up his approach. He hammered home to retail investors what had long been common knowledge among pension funds and other savvy institutions; namely, that an actively traded portfolio seldom outperforms the broad market over the long term, net of expenses and trading costs.

He urged investors to look beyond quarterly performance and was a strong advocate of indexing; in other words, structuring a portfolio to mirror a broad market index. Today, the five biggest U.S. mutual funds, two of them in the Vanguard stable, are all index funds.

Bogle was also a fierce critic of funds’ high management expenses. Under his watch, Vanguard managed its indexed funds at cost, with expense ratios far lower than its rivals. A comparison of Vanguard’s expense ratio to the industry average, as estimated by Corporate Knights, suggests that Vanguard saved investors US$28.6 billion in 2017.

Vanguard is owned by its funds, thus putting the emphasis on cost control rather than maximum profits to shareholders. The upshot of that structure was that Bogle himself amassed far less wealth than other Wall Street high-flyers. Forbes magazine estimated his net worth at a relatively modest US$80 million in 2012.

Bogle would mischievously compare that number to the estimated US$7.5 billion net worth of Ned Johnson, owner of Fidelity Investments, Vanguard’s chief rival. But, as he would point out, Vanguard’s assets under management, now totalling more than US$5.3 trillion, are more than double Fidelity’s US$2.5 trillion.

“My only regret about money,” he told The New York Times in 2012, “is that I don’t have more to give away.” Too bad more titans of industry and finance don’t think the same way.

Zero: Postmedia’s Paul Godfrey

Few tears were shed either within or outside Postmedia when news broke in January that Paul Godfrey was stepping down as chief executive of Canada’s largest newspaper chain.

“It’s just a shame it didn’t happen years ago,” said Martin O’Hanlon, president of CWA Canada, the union that represents staff at several Postmedia papers. “It is not hyperbole to say that Godfrey has been a disaster for the newspaper industry in this country.”

Postmedia’s dismal financial performance might have been reason enough for its directors to push for a management shake-up.

Revenues have been on the skids, sinking another 9.4% in the quarter to November 30, 2018, from a year earlier. The company reported a $1.4 million loss, and its balance sheet showed a capital deficiency of almost $100 million. Once worth billions, Postmedia had a market value of just $95 million in mid-February. The chain’s newsrooms have been through several painful restructurings during Godfrey’s eight-year tenure, including a succession of layoffs and buyouts.

But Postmedia also stands out for its sub-par governance. Management undermined editorial independence ahead of the 2015 federal election by instructing its flagship dailies – such as the National Post, Vancouver Sun, Calgary Herald and Ottawa Citizen – to run editorials favouring then-prime minister Stephen Harper. It did much the same the previous year during provincial elections in Alberta, when editorial boards were told to support the Conservatives.

Several other allegations of newsroom censorship have surfaced in recent years. And there’s more.

Even as Postmedia was shedding staff and cutting benefits, the board approved handsome increases in Godfrey’s compensation. His pay soared to over $5 million last year from $1.7 million in 2017.

Then there’s the question of Godfrey’s lengthy tenure. He turned 80 in January. During a conference call last April, Leon Cooperman, the 75-year-old head of New York hedge fund Omega Advisors, took a pointed jab at Godfrey. “We both have a limited time left on this earth,” said Cooperman. “Neither of us want to spend it without being very productive.”

A growing number of North American and European companies have set term limits and a mandatory retirement age for directors. Nicholas Price, content marketing manager at Diligent, a corporate governance portal, wrote in a blog post last year: “It’s gradually becoming accepted…that term limits are a viable way to promote director independence and keep board director skills fresh.”

That message appears to have fallen on barren ground at Postmedia. Godfrey may no longer be CEO, but he remains executive chairman, a powerful job. Responding to Cooperman during last April’s conference call, he quipped: “May we both live to 120.”

The post Heroes and zeros: Vanguard’s John Bogle and Postmedia’s Paul Godfrey appeared first on Corporate Knights.

For several years, the so-called HVAC industry – heating, ventilation, air-conditioning – has been turning out increasingly sophisticated programmable thermostats with a range of features designed to allow users to adjust a home’s temperature automatically (including smartphone apps that let users make changes remotely). However, the promised energy reductions and related savings associated with the set-and-forget features go right up the chimney when an occupant decides the dwelling is too hot, too cold or too stuffy, and intervenes. Depending on the device, the settings may not revert, paradoxically enabling all the carbon-wasting inefficiencies these devices were meant to prevent.

Yet with the advent of sophisticated cloud computing, artificial intelligence (AI) analytics and internet-connected sensors, some companies in this market, like Toronto-based Ecobee, are creating smart thermostats that continually readjust temperatures based on incoming real-time data from occupancy and humidity sensors, exterior temperature readings and predictions based on historical patterns of user behaviour drawn from tens of thousands of wirelessly connected thermostats.

Last summer, Ecobee added one more element through its new Peak Relief pilot program launched in partnership with several thousand customers. The company’s AI algorithms allow its thermostats to dynamically adjust to the time-of-use energy pricing policies now in place in Ontario, California and Arizona. Fatima Crerar, Ecobee’s director of social impact and sustainability, says the analytics also enable the company’s thermostats to learn how well a given house holds heating or cooling, and to set temperatures accordingly, especially when no one is at home.

Since 2016, Ecobee has adopted a policy of making anonymized user data available to researchers (customers have to opt-in) in order to suss out new insights about energy consumption. “It feels like a values alignment,” Crerar says. “Ecobee wouldn’t be here if we didn’t hang out with scientists.”

In fact, one team of University of Toronto and University of Carleton researchers is using data culled from over 70,000 active Ecobee smart thermostats over three and a half years to search for patterns in a huge tranche of granular operational data, such as run times and set points.

According to doctoral candidate Brent Huchuk, an HVAC expert, the team (which includes engineering profs Scott Sanner and William O’Brien) analysed the data using AI algorithms to understand when and why users tend to hit override. The idea is that this information can give the devices additional predictive chops, for example, by automatically turning up the thermostat just enough on cold days based on observations about when an occupant is most likely to override the controls.

These insights, Huchuk says, allows the technology to “pre-adapt.”

Such applications hint at the role AI and machine learning will soon play in the broader world of low-carbon, smart building design. Climate change experts estimate that buildings generate about 40% of all emissions, and HVAC systems account for up to half of a building’s energy consumption (the rest goes to lighting, other electrical systems, etc.).

There are a growing number of engineering and architectural innovations for mitigating building-related emissions, including passive design (e.g., making use of building orientation, insulation, materials and other sources of ambient heat or cooling), various heat and cooling recovery systems (e.g., heat recovery pumps attached to drains or air vents), and emerging technologies like electrochromic windows (a.k.a, “smart glass”), whose tint automatically adjusts to sunlight intensity to prevent excess solar loading within west-facing condos, for example.

Increasingly, sensors powered by AI and connected to the Internet of Things are becoming crucial tools in this narrative.

The federal government’s 2016 emissions reductions plan in 2017 incorporated a smart buildings strategy. Since it was released, researchers at Natural Resources Canada have begun testing various AI-based projects that draw on the data generated by smart buildings, according to an NRCAN spokesperson. “While the uptake of AI techniques has been somewhat slower in the world of buildings than in other fields, the potential is significant.”

For example, AI applications in highly automated suite-based HVAC systems can draw on historical patterns and other sources of information to model user behaviour, says Kim Pressnail, a University of Toronto civil engineering professor. He cites the case of apartments in new condo towers, which can be notoriously difficult to heat and cool properly due to their large glass windows.

Researchers and design firms, he says, are now working on a two-step process for significantly improving the thermal controls in these apartments. “It’s not glitzy but it makes a huge difference in how buildings perform.”

The first step, he says, is to create air-tight units so the internal heating and cooling systems within each apartment can be regulated properly, including with fresh air ventilation. Then, with occupancy sensors that allow smart thermostats to learn how the residents come and go, these AI-based systems can be “trained” to come on and shut down automatically, with significant potential energy savings. “It sounds simple, and it is,” he says. The payoff, Pressnail adds, isn’t just about reduced energy bills and emission reductions; the units and potentially entire buildings become less expensive to operate and more comfortable to be in. “An AI building will be worth more in the marketplace.”

In fact, proof of Pressnail’s prediction is already visible in other corners of the real estate world. Universal mCloud (MCLD: TSX Venture), a publicly traded Vancouver clean tech firm, has developed cloud-based AI systems designed to improve the energy efficiency of commercial buildings like fast-food restaurants, bank branches and other retail stores, including those operated in Canada by Telus. Unlike commercial office towers, observes Dave Weinerth, president of mCloud’s smart buildings division, many of these structures are operated by landlords who aren’t especially sophisticated about their energy consumption.

In the past few years, mCloud has installed WiFi-connected thermostats and sensors in these modest structures, with the operational data constantly being uploaded to a cloud-based system. There, AI algorithms will optimize temperatures and set points by constantly comparing against historical performance while factoring in exterior temperatures, occupancy levels, and so on. The combination of the wireless sensors and the AI analytics can also alert landlords when the performance of their HVAC systems, which are generally situated on the roofs of such buildings, are beginning to flag and require preventative maintenance.

The savings aren’t trivial: For a modest 3,500 square foot fast-food restaurant that spends $20,000 on its HVAC-related energy expenditures per year, mCloud claims its optimization technology can slash that figure by 15-20%, which represents both a financial savings and a move towards a zero-footprint building.

Aggregate the savings from the thousands of small commercial buildings lining North America’s suburban arterials, and the scale of the emission reductions related to just this one AI application becomes apparent.

“We’ve got to do better with buildings because of climate change,” says Pressnail. “The jury [on this issue] isn’t out. It’s returned its verdict.”

John Lorinc is a Toronto-based journalist and author specializing in urban issues, business, and culture.

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It’s time for a new story, one where Indigenous people assume their rightful place at the economic table of this country.

Why Indigenomics? The truths of this country lie in the experience of Indigenous communities in poverty without access to clean water, warm housing, clean power or good jobs. The root of this can be traced to centuries of being excluded economically.

Dara Kelly notes in her paper Indigenous Development, Wealth, Freedom and Capabilities: “Situating Indigenous economic freedom within a framework of humanism affirms not only the rights of Indigenous peoples to define our own economic futures, but in exchange for economic autonomy, contracts a mutual responsibility to care for, and not violate the rights of others to economic freedom.” This is the next-level Canada. This is Indigenomics.

Through the formation of Canada, Indigenous peoples have gone through four economic stages:

1. Disruption: The first is characterized by the systemic disruption of existing Indigenous economic systems, ways of being and removal from the land while severing inherent authority and responsibility to place.

2. Entanglement: This second stage is characterized by the complexity of the entanglement of the Indigenous relationship firmly embedded within conflict stemming from the disruption.

3. Emergence: The third is characterized by the emergence of the Indigenous legal environment. With over 250 cases won to date, these cases have shaped the economic space for the growth of Indigenous business.

4. Empowerment: Today, Canada is in the fourth stage, characterized by the rise of Indigenous economic empowerment. As an effect of the shifting Indigenous Aboriginal rights and title legal environment, economic equality and inclusion now shape the rise of Indigenous economic empowerment today.

A fundamental question that shaped this country was, how do we eliminate the Indian problem? It is a question that has penetrated the consciousness of generations of Canadians allowing the perception of Indigenous peoples as a problem or a burden. This question begs for relevance as the Canadian courts continuously validate Indigenous rights through the acknowledgement of our place in modernity and the requirement for economic inclusion today.

Questions are the architecture for tomorrow; the quality of questions we ask drives the results. The question of today is, how do we collectively facilitate the development of Canada’s $100 billion Indigenous economy? In the words of Canada’s greatest hockey player, Wayne Gretzky: “Skate to where the puck is going, not where it has been.” This is how the Indigenomics Institute is working to develop the emerging Indigenous economy.

This new story of Indigenous peoples can be seen through the joint work of the Canadian Council for Aboriginal Business and TD Economics, which estimated the annual contribution of the Indigenous economy at over $30 billion in 2016. This figure acts as an initial metric of the growing strength of the Indigenous economy.

The benchmark numbers that frame the growth of the Indigenous economy can be drawn from recent reports:

• An Atlantic region report identified the size of the Indigenous economic impact in that region as $1.2 billion annually.

• A recent Manitoba report puts the Indigenous economic impact in the province at over $9 billion annually.

• An Indigenous Works report based on a research study found that up to 85% of Canadian businesses currently do not engage with Indigenous peoples in any way.

• A National Indigenous Economic Development Board report highlights the potential of an annual $27.7 billion boost to the Canadian economy through better mobilization of the Indigenous workforce.

Framing the future of Canada and the Indigenous relationship can be understood within the concept that we as a country have reached the intersection where the risk of doing nothing outweighs the cost of doing nothing.

Setting the stage for a next-level Canada today means actualizing this growing story of Indigenous economic potential. It must be based on a new understanding that the growth of the Indigenous economy cannot be advanced within existing Indigenous and Northern Affairs Canada program and funding approaches. Modern Indigenous economic design is required today, with a strong Indigenous equity ownership, governance, environmental planning and procurement at the heart of any approach.

While Canada was founded on the economic legacy of systemic economic segregation of Indigenous peoples, the pathway forward must be inclusive and purposeful. Indigenous resilience is now expressing out from the margins to the centre of this country’s economic lifeblood.

Indigenomics is a platform for economic reconciliation. Indigenous peoples have existed on the margins of the balance sheet, viewed as a liability. Reconciliation must now occur in the balance sheet of this country. To achieve a $100 billion Indigenous economy requires a shift in how we relate to Indigenous peoples – to see Indigenous peoples as economic powerhouses in our own right.

The $100 billion Indigenous economy is a modern stake in the ground, the marker of a new economic reality on which Canada’s larger economic future now depends.

Carol Anne Hilton is the CEO and founder of the Indigenomics Institute

Also by Carol Anne Hilton: ‘Investing in reconciliation: the role for institutional investors.’

The post Indigenomics in action appeared first on Corporate Knights.

I remember paying him a visit back in 2013 at Vanguard’s sprawling Malvern campus located outside Philadelphia. He greeted my colleague, Doug Morrow, and I with a left-handed handshake. His right arm was in a sling and looked a little the worse for wear. He had banged it up during a fall the day before, but that was not going to stop him from making an early morning interview with a Canadian magazine he’d never heard of. He said he didn’t like to break his appointments.

Over the course of an hour, Bogle held court, bonding with Doug, a fellow disciple of index investing, and sparring with me over the merits of sustainable investing (he thought it was doomed to underperformance like most other types of stock-picking).

While it is somewhat ironic that this fiercely independent man of moderation spawned an investment colossus based on automation, he maintained a scrappy skepticism of groupthink to his last days.

In that vein, I imagine that Bogle would smile at Eric Reguly’s account of the decision to initiate the most successful corporate climate change metamorphosis to date. The multi-billion call that led one of Europe’s most coal-intensive companies to go all-in on a renewable future was made on the conviction of two human beings, without bothering to get a second opinion from outside consultants. The only mistake they made was thinking the shift from black to green power would take 30 years. Instead, it took less than 10, paying off handsomely for the climate and shareholders.

I also think he would have enjoyed Paul Mainwood’s clear-eyed look at the energy industry’s faulty crystal ball, the World Energy Outlook, which is actually a pretty useful tool for predicting the clean energy future, if you adjust it upwards by the same 10% per year it has historically undercalled the march of renewables. If this trend continues, we will be in much better shape than the backward-looking clean energy pessimists assure us is our fate.

Always a stickler for counting all the costs, I imagine Bogle would also appreciate Peter Gorrie’s review of electric cars versus their best-selling gas peers. Thanks to electricity being cheaper than gas and lower maintenance charges (no oil changes needed), electric cars are now cheaper than their gas counterparts in most places on a total cost of ownership basis (even before accounting for any sweetener subsidies).

While he may no longer be walking among us, the example of John Bogle lives on in the countless restive human spirits propelling the march of progress by stubbornly refusing to allow the tyranny of process to triumph over clear-eyed human judgment.

The post Bogle the mind appeared first on Corporate Knights.

The first concern is easing as batteries gain capacity and efficiency. For the latest generation, range exceeds 200 kilometres and some claim more than 400.

Determining range is tricky enough, since it’s heavily impacted by driving style, load, terrain and temperature.

Cost calculations are even more complex. Common wisdom is that electric vehicles (EVs) are more expensive to buy than alternatives powered by internal combustion engines (ICEs), but cheaper to fuel and maintain. As a result, EV advocates argue, it’s only fair to calculate total costs over a vehicle’s lifetime.

But, as we shall see, that’s easier said than done.

Our aim here is to compare the total cost of ownership, or TCO, of Canada’s top-selling ICE vehicles with battery-powered alternatives of similar size, features and quality.

The category leaders are the Honda Civic sedan, Toyota RAV4 compact SUV, and, this country’s sales champion, Ford’s F-150 pickup truck.

To challenge the Civic, we chose the revamped Nissan Leaf S. Hyundai’s new Kona Electric takes on the RAV4. And, up against the F-150 is … well, nothing. At least, not yet. A few manufacturers are developing battery-powered pickups, but none will go on sale before the end of 2020 and their performance specifications remain sketchy.
TCO comparisons assume EVs have higher purchase or lease costs, including price, taxes and interest. Their fuel should be cheaper, in part because battery power is more efficient than internal combustion. With fewer lubricants and moving parts, and less wear on brakes, they ought to cost less to maintain – although experts disagree on how much less.

“Maintenance costs are largely unknown,” says Steve McCauley, senior director, policy, at environmental research and advocacy group Pollution Probe. “We’re still dealing with the first generation of EVs on the road.”

“It’s difficult to assign maintenance values because every person’s maintenance cycle is different based on frequency of use, road conditions in their area, weather conditions in their area, and so on,” says Brian Miller, communications co-ordinator at Plug’n Drive, a Toronto-based non-profit committed to accelerating the adoption of EVs.

But the deeper we dig, the more complex comparisons become.

Purchase price seems simple, except that while comparisons are usually based on suggested retail price, most manufacturers offer a wide range of discounts, which can even be influenced by a buyer’s bargaining skills. Interest rates vary from bank to bank and dealer to dealer, and with a buyer’s credit rating. Financing costs depend on those rates, as well as on how much the buyer borrows rather than pays in cash.

The cost of batteries – the main reason for EVs’ higher price – keeps falling. When the first Leaf hit the streets, it was about $1,000 per kilowatt-hour of capacity. It’s now around $200, and further drops will change the cost equation.

Fuel costs are, literally, all over the map. Gasoline prices vary from province to province, and can rise and fall dramatically. Electricity rates tend to be more stable but differ widely from place to place. In addition, most jurisdictions offer time-of-use rates, which generally mean you pay less if you consume electricity during off-peak times. One result is that per kilometre driven, electricity is occasionally more expensive than gasoline.

With all this in mind, we’ll plug some numbers into a TCO analysis worksheet – the most useful we found – developed by Tom Lombardo, a retired professor of engineering technology and now president of Tohoca, a communications company in Rockford, Illinois.

Here are our assumptions:

• We use each vehicle’s suggested retail price, for models that are usually a step up from basic. HST or its equivalent is set at 12%. We did not include delivery charges or other dealer fees or, for EVs, the cost of a battery charger.
• Calculations are based on manufacturers’ claims for range and Natural Resources Canada’s Fuel Consumption Guide.
• Each vehicle is driven 20,000 kilometres per year, the “rule of thumb” cited by Statistics Canada.
• The gasoline price is $1.20 per litre, roughly the current average in Canada’s largest markets. The electricity cost is 8.7 cents per kWh, the off-peak price in Ontario, based on the assumption that EV owners recharge their vehicles at home overnight.
• Based on data from Pollution Probe and Edmunds.com, a leading industry analyst, the lifetime maintenance and repair cost for an EV is about 75% that of an internal-combustion vehicle. We used $100 per month as an average for the ICE, based on data from Canada Drives.
• Repair and insurance costs are about equal.
• The ICE buyer pays all cash. The EV buyer pays the same amount in cash and borrows the cost difference at 4.5% interest, with a 72-month term – the length most Canadian buyers now use, according to various sources.
• Each vehicle is kept for 10 years, so depreciation is 100%.
• We do not include EV subsidies, now available only in Quebec, up to $8,000, and British Columbia, up to $5,000.

Given our inputs, we found the $23,770 Civic LX with automatic transmission would cost $66,020 over 10 years. The Leaf S sticker price $36,798, would cost $63,816 over that same period.

The 10-year TCO for the $33,690 RAV4 XLE with front-wheel drive would be $78,373. The $45,599 Kona Electric “Preferred” would cost $73,388.

So, the EVs win in these categories. But TCO comparisons are meaningful only with specific local numbers.

For example, electricity costs nearly 17 cents per kWh in Halifax, where the Leaf’s ownership cost rises to $65,555 and the Kona’s price climbs to $75,004. Since Halifax’s gasoline price is close to our assumption, the Civic and RAV4 retain almost the same costs.

In New York City, where electricity runs 31 cents (Canadian) per kWh while gasoline is just 84 cents per litre, EVs lose in the comparison. But in Norway, where electricity rates are in the same ballpark as Canada’s but gasoline costs twice as much, EVs win hands down.

No battery-powered pickup trucks are ready for comparison, and it’s uncertain which will make it to market. The list includes the Havelaar Bison, planned for Ontario, and two U.S. models, the Bollinger B2 and Rivian R1T. Tesla promises one, but with no firm timetable.

All claim impressive range, payload and towing capacity, but none has performed in the real world nor revealed how large loads and rugged conditions would impact their range – a crucial consideration for working trucks.

The Rivian R1T, backed by a recent US$700 million investment by Amazon.com, seems furthest ahead. With the biggest battery available, Rivian says its range will top 600 kilometres. But the price in the U.S. will start at about C$94,000, and that’s for a base version with only 370 kilometres of range, making it more than double the price of a similar F-150.

Our conclusion: It’s clear that EVs are more expensive to buy or lease, and whether they overcome that handicap with lower operating costs depends heavily on fuel and power prices where you live.

As battery costs fall, the price gap will shrink, making it more likely that EVs will win any cost comparison, just as they already beat ICEs on environmental impacts.

Peter Gorrie is a Victoria-based freelance writer and editor who has covered environmental issues for more than 30 years.

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The post Oil and water appeared first on Corporate Knights.

But Denmark had a dirty little secret that was soon uncovered by the army of foreign journalists at the UN event (I was one of them): It had one of the most carbon-intensive electricity-generation systems in Europe, and the world. And the company largely responsible for the literal black cloud over Denmark – Dong Energy – was controlled by the state. How ironic: The host of the conference whose goal was to lay out a plan to wean the world off fossil fuels was itself utterly shackled to the grubby old world of oil, natural gas and coal.

Dong, which stood for Danish Oil and Natural Gas, emitted fully one-third of the country’s carbon dioxide emissions. Something was indeed rotten in the state of Denmark.

What we journalists couldn’t be bothered to find out at the time was that, by then, Dong and its owners were as repulsed by the company’s black image as the environmentalists were. By 2009, Dong, rather quietly so, was launching a campaign to completely reinvent itself as a top-to-bottom renewable energy company.

“Dong formulated the 85/15 vision,” says Jakob Askou Bøss, the senior vice president of corporate strategy for Ørsted, as Dong has been known since its name change in 2017. “At the time, 85% of our power and heat production was black and 15% was green. Our CEO, Anders Eldrup, said that within a generation, Dong would flip that ratio around, so that 85% would be green and 15% black.”

Eldrup’s definition of “generation” was about 30 years, according to Bøss. In other words, Dong’s reinvention was going to be a slow burn – fossil fuels would darken the company for some time. Instead, the transformation was accomplished more than 20 years faster. By 2018, Ørsted’s green energy output was 75% of total output and the company had reduced its CO2 emissions intensity per kilowatt hour by 72%. By 2025, two years after the last of Ørsted’s coal plants are to be shut, green energy is set to account for 99% of the company’s output while CO2 emissions intensity is to fall by 98% of 2009’s level.

The transformation didn’t end there. In 2009, Ørsted was largely a domestic Danish company. Today, it is the leader in offshore wind power, with control of 30% of the global market. Ørsted has more than two dozen offshore farms in Denmark, Britain, Germany, Netherlands and Taiwan, and has several in development off the U.S. east coast. By 2025, the company says it will generate enough green energy to supply 30 million people, up from 12 million today. The profitable transformation has propelled the company’s stock market value of about US$30 billion, making it one of Europe’s most valuable energy companies.

In January, Corporate Knights named Ørsted as the world’s “most sustainable” energy company and the company’s overhaul has won admirers far and wide. Politicians and energy executives from the United States, Japan, China, France, Poland, India and Taiwan have visited Ørsted’s headquarters, just north of central Copenhagen, to learn how an infamous polluter turned into a global green-energy leader.

“The transformation of Ørsted was really impressive,” says Torben Möger Pedersen, CEO of PensionDanmark, the big labour-market pension fund that has emerged as one of the world’s most aggressive investors in offshore wind projects. “They made the right decision to become a wind-power company.”

The corporate overhaul was not as easy as it appeared. In 2012, just as Dong was spending fortunes on renewable power, it was battered by financial crisis. Even before then, the company was essentially at war with itself as the old guard fought to keep fossil fuels, especially coal, in the energy mix. Among engineers, Dong had a fine reputation as the builder of the world’s most efficient coal plants, and renewable energy alone could not possibly supply Denmark’s energy demands, or so the argument went. But Eldrup, his successor, Henrik Poulsen, and Bøss, who joined the company in 2004 and has been instrumental in Dong’s radical change in direction, were convinced the company could, and would, be painted a pleasing shade of green.

THE TRANSFORMATION of Dong into Ørsted is visible to anyone who lives in Copenhagen. Not only is the sky over the capital city cleaner, but the very symbols of the Dong era are getting a remake.

As you travel north from downtown Copenhagen to the suburb of Gentofte, where Ørsted’s offices are located, you pass the Svanemølle Power Station, facing the Strait of Øresund, which separates Denmark from Sweden. The enormous and oddly handsome, boxy red-brick building, with its distinctive triple white chimneys, was finished in 1953 and burned vast quantities of coal until the mid-1980s, when it cleaned itself up a bit by converting to natural gas.

Today it supplies both electricity and district heating – the system to distribute heat generated as a by-product to homes and businesses – to Copenhagen. But as Ørsted gets out of the fossil fuels game, the idea is to turn the plant into the new home of the Danish Museum of Science and Technology. In some countries, fossil fuel plants are becoming relics of the past, like steam locomotives. But unless thousands more of these plants give up the ghost, the effort agreed at the 2015 Paris climate summit to prevent global warming from exceeding 2 C above pre-industrial levels is doomed.
It was Dong’s desire to bring down Denmark’s embarrassingly high CO2 emissions that triggered the company’s revolution. What Dong didn’t know at the onset of its adventure was that transforming itself into Ørsted – named after Danish physicist Hans Christian Ørsted, who discovered electromagnetism in 1820 – would come with impressive shareholder returns.

Dong was founded in 1972 as a state-owned energy company called Dansk Naturgas. Its mission was to find oil and gas in the Danish sector of the North Sea, whose riches would soon put Britain and Norway on the global energy map (the company was renamed Dong a few years later). At the time, the Danish energy supply was almost entirely based on oil – there was no such thing as offshore wind generation back then – the vast majority of which was imported from Saudi Arabia. Dong’s owners hoped the company’s North Sea production would reduce Denmark’s reliance on Saudi oil. Later, the company would develop a domestic energy transmission network.

Denmark’s reliance on cheap oil was rudely interrupted by the 1974 OPEC oil embargo, which sent prices up 400% virtually overnight. Suddenly, Denmark’s energy bill was crippling and the country moved fast to convert its oil-burning generating plants (none of which was owned by Dong at the time) to coal, which was less expensive and less prone to geopolitical disruption. Coal, the dirtiest fuel, became Denmark’s mainstay.

Over the decades, Dong built up its North Sea oil and gas portfolio. In the middle part of the last decade, it moved into electricity. In 2006, Dong merged with five other domestic electricity companies, two of them producers and the other three distributors, exposing it to coal for the first time. By then, the dangers of global warming had been drilled into the public consciousness. Yet Dong’s strategy, incredibly, was to keep expanding in coal. It was developing the enormous Greifswald coal-fired power station in northeast Germany. “Coal was our core competence,” says Bøss. “We were one of the most coal-intensive energy companies in Europe.”

Not long after the merger, Greifswald became the object of sustained anti-coal protests and by 2008, the year before the Copenhagen climate summit, Dong was having second thoughts not just about Greifswald but about its entire fossil fuel strategy.

“The whole topic of climate change was coming on the agenda,” Bøss says. “Al Gore had published his Inconvenient Truth, which had a big impact, and the EU launched the 2020 [CO2-reduction] goals. At the same time, we were running into resistance at local debates. I can remember talking to our CEO at the time. He said we can invest in offshore wind farms, which will have a bright future and it’s the way society is going, or we can invest in this coal-fired power plant that is fundamentally not the right thing to do. We would be burning coal for 40 to 50 years when we should be converting to green.”

Bøss says “the moment of truth” came in early 2008 when he and Eldrup, the CEO, pretty much committed to the black-to-green transformation. Morally, it was the right strategy and they thought that, financially, they could pull it off, even if the company faced a hefty bill to construct offshore wind farms and dismantle coal plants. The threat of hefty carbon taxes made the transformation all the more alluring. They pushed ahead with their plan without getting a second opinion from outside consultants.

In September of that year, Eldrup used a lengthy op-ed piece in Denmark’s Politiken newspaper to reveal the new strategy to the public. “We must create a completely different energy system, where the majority of the world’s energy comes from the infinite amounts of naturally occurring energy sources, such as wind and sun,” he wrote.

At the same time, he stressed that transformation would not be quick – coal would be around for some time as demands for reliable, cheap energy rose. The message: Dong would clean up its act, but don’t expect an overnight miracle.

What Eldrup didn’t mention is that he and Bøss were facing massive internal pressure to keep Dong as black as possible. To them, the resistance was expected because Dong had spent three decades building itself up as a traditional fossil fuel company. “When you are an oil and gas and coal company and someone comes along and says those are no longer the future, there would be resistance,” Bøss says. “Fossil fuels were seen as our core competence, where we had our growth strategy. Our employees said we are the best in the world in coal-fired power plants – we are the benchmark. There was quite broad and profound skepticism about the plan.”

The Danish government was skeptical too, remembers Fritz Schur, the former SAS airline chairman who was chairman of Dong from 2005 to 2014. “Some politicians were afraid that we were investing too little in the secure parts of the company – oil and gas,” he says, noting that even the prime minister requested his presence to explain Dong’s black-to-green strategy. “For the politicians, it was unthinkable that we would trade oil and gas for renewable energy. They saw it as too risky.”

Pedersen, the PensionDanmark boss who watched Dong’s remake and recruited some of its top wind-power executives to start the pension fund’s own renewable energy partnership, says the internal battle came to a head in 2012, when Schur fired Eldrup, the CEO. Pedersen said Schur “disagreed with Eldrup’s plan to turn Dong into a wind-based renewable energy company.”

Bøss disagrees that a clash over strategic visions cost Eldrup his job in 2012. He insists that the dispute instead was over pay, specifically about “unusual compensation terms unknown to him [Schur]” of four senior wind executives who reported to Eldrup. “The board lost confidence in Eldrup,” Bøss says. Schur agrees, saying that whistle blowing over excessive executive pay among the wind executives was behind their ouster (Eldrup could not be reached for comment).

Dong had other things to worry about that year besides rogue executives. The company’s gas business – which included power production, trading, storage and liquefied natural gas – and those of its European gas rivals got slaughtered that year because of plummeting gas prices in the United States. American coal suddenly became less competitive and vast amounts of surplus coal landed in Europe, where it became the preferred fuel for power generation at the expense of gas.

Dong’s enormous gas business lost money in 2012 just as the company’s debt was soaring to pay for the wind rollout.
When Standard & Poor’s downgraded Dong’s debt, the company went into crisis mode which, oddly, accelerated the move into the ever more profitable wind business. To save precious capital, it ditched eight businesses, including all the gas businesses, hydro and the waste-fired power plants. “They were forced to focus,” says Jens Houe Thomsen, senior bond analyst at Denmark’s Jyske Bank. “They had been betting on everything you could bet on. When the crisis came, they put almost everything up for sale and set ambitious targets to take down the cost of producing energy.”

The main survivors were offshore wind and oil and gas. To shore up the balance sheet, Goldman Sachs injected US$1.2 billion into the company, giving it a 17.9% stake (Goldman sold the last of its stake in 2017 for a hefty profit). By 2014, Dong was saved. In 2016, as wind-power earnings were climbing, partly because the technology and installation costs were plummeting, Dong joined the stock market through Denmark’s biggest initial public offering, and the second-biggest IPO worldwide of the year. In 2017, Dong sold its North Sea oil and gas business and changed its name to Ørsted to reflect its near complete transformation from fossil fuels to renewable energy. Ørsted now bills itself as “the greenest energy company in Europe.”

The final proof of Dong’s seemingly miraculous transformation into Ørsted can be measured by its stock market performance. The IPO price was 235 Danish kroner per share. In mid-February, the price was 480 kroner. In the last year alone, the shares have climbed more than 30%. Ørsted has handily outperformed its peer group and the major European stock market indices. Not bad for a company that has evolved into a wind-power utility that was supposed to produce predictable and pedestrian utility returns.

“Denmark can be very proud of what was done at Dong,” says Schur. “It went from having no renewable energy to being one of the biggest renewable energy companies in the world.”

Eric Reguly is the European bureau chief for The Globe and Mail.

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To this end, Public Services and Procurement Canada and its property manager, BGIS, developed the GHG Options Analysis Methodology in 2016. On simple projects, instead of replacing existing equipment with the same technology, alternatives are evaluated to maximize carbon reductions while remaining cost neutral over a 25-year life cycle. When Radford asks for money for more complex projects, he presents Treasury with the following four options:

1. Design to meet minimum departmental commitments
   Design to achieve cost-neutral GHG emission reductions
2. Design to achieve maximum GHG emission reductions
3. Hybrid of two and three.

“Generally, they go for [number] four,” Radford says. It is making a big difference. “If we stay on the current path, and the investments continue to flow, we will hit carbon neutrality in the 2030s,” he says.

One of the quickest ways to get big energy reductions is by using artificial intelligence to make buildings smarter.

Spotlight: Smart lights

Building name and address: Library Square Tower, Vancouver

The gist: The Alec lighting controllers are installed as standalone or networked devices easily programmed by its phone app or from a workstation. Each device is capable of daylight harvesting, learning occupancy patterns of space use, energy metering, program scheduling, and much more. This makes it easy to automate switching lights off anywhere and anytime they don’t need to be on.

Cost of project (estimate): $196,273

Energy savings (estimate): 30% of the lighting energy in the first year alone

Payback period (estimate*): 4-6 years

*not including utility or other incentives

Spotlight on green building innovation is produced in partnership with the Building Energy Innovators Council

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Enjoying the spectacle of Jody Wilson-Raybould cleaning the floor with the Prime Minister? Guess what corporate Canada: you’re next. Anybody doubting this needn’t look further than the 275 straight court cases Indigenous peoples have won, stopping many resource projects in their tracks.

The new rule of business in Canada’s resource economy is: No Indigenous buy-in, no dice. Buy-in doesn’t come cheap. It means a radical departure from business as usual practices. That means more than just a few token jobs. The table stakes are meaningful equity ownership, control through executive and governance bodies, employment, involvement in environmental planning and, critically, sourcing. Canadian businesses and governments need to be much better partners and customers of Indigenous businesses.

While there are some inspiring examples of this already at play across the nation, it is a cold reality check that of the 25 largest infrastructure projects under way in Canada with significant Indigenous impact, 22 of them have 0% Indigenous ownership, according to a review by Corporate Knights and ReNew Canada. A major barrier to getting Indigenous equity buy-in is lack of access to financing. One wonders how much further ahead our country would be had our bankers spent as much time finding solutions to the lack of Indigenous access to capital as they have chiding the government over pipeline delays.

Cold reality check is that of the 25 largest infrastructure projects under way in Canada with significant Indigenous impact, 22 of them have 0% Indigenous ownership.

The good news is we are not starting from zero. Indigenous groups already have equity ownership in power projects that provide one-fifth of Canada’s electricity generation. And TD has pegged the Indigenous economy at over $30 billion, or about 1.4% of Canada’s$2 trillion economy. But given that Indigenous people represent 4.9% of the Canadian population and have significant property rights, it is a national scandal that they are sharing in less than one-third of Canada’s economic bounty.

We will know we have made progress when the Indigenous economy is at least in proportion to the Indigenous population, which would be about $100 billion in today’s dollars.

This should be Canada’s number one economic objective, as there is probably nothing else that would boost the broader economy as profoundly. It is heartening to see companies in sectors with traditionally fraught relations with Indigenous peoples now pioneering promising new models of commercial partnership including significant Indigenous equity ownership and procurement. Governments can take note, especially on Indigenous procurement. Total federal procurement spend with Indigenous businesses is just $63 million per year (0.3% of the total $20 billion federal procurement budget) as compared to $1 billion of procurement from Indigenous businesses by just three energy companies.

It will not be easy and it will take time to rebuild the trust, so we cannot afford to rush. But we must begin with the fierce urgency of now.

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