As an invitation to a larger discussion of how we can invest in a clean energy future, Corporate Knights and sustainability non-profit As We Sow created the Carbon Clean 200 – a list of the 200 largest companies worldwide ranked by their total clean energy revenues.

The Clean200 is intended as the clean energy inverse of the Carbon Underground 200. Where the Carbon Underground 200 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 environmental thinker Lester Brown and many others have called “The Great Energy Transition” in a just and equitable way.

The moral case for divesting from fossil 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 from 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 burned 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 Caufield & Byers in Silicon Valley. It might seem counterintuitive 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 and capitalize on the creation of the world 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 learned this the hard way. Indeed, in a world of limited capital, every investment holds 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 last April, following Arch Coal and Alpha Natural Resources. The Dow Jones Coal Index has dropped more than 75 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. According to an Institute for Energy Economics and Financial Analysis report, “ExxonMobil has experienced a 45 per cent drop in company revenue over the past five years, a growing reliance on long-term debt to cover shareholder dividend payments, and declines in capital expenditures, end-of-year cash balances, and free cash flow – all signs of significant deterioration. ExxonMobil’s stock performance in the meantime has trailed the S&P 500 for 10 quarters in a row.”

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 five per cent of global investment indices; the Clean200 list of companies has a collective value over $1 trillion.

In the next 10 years, McKinsey & Co. 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 in 2015, 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 two 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.

While the rhetoric and some of the cabinet appointments of the current White House seem incongruent with the above points, global growth is now being driven by emerging economies, which account for 80 per cent of economic growth. This was one of the points made by Chinese President Xi Jinping in his keynote address and coming out party as emerging superpower this January at the World Economic Forum in Davos. While not widely picked up in press reports, Xi also made a point emphasizing “Our efforts to pursue green development are paying off.” Indeed they are. Among the 2017 Clean200 companies, Greater China takes the crown, with 71 companies versus 41 from the U.S., despite the U.S. stock market being more than twice the size of Greater China’s.

Being on the vanguard of the clean energy transition is at once an economic, political (cleaner air) and geopolitical imperative as it relates to China’s role as a leading nation in the 21st century. This point is emphasized by how China’s dominance in renewables is rapidly spreading overseas, with the country accelerating its foreign investment in renewable energy and supporting technologies.

The clean energy “space race” is on. It remains to be seen which country and which investors will prosper from it.

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.

Methodology

The Clean200: The world’s biggest 200 public companies ranked by green energy revenues was first published on August 15, 2016, by Corporate Knights and As You Sow; the current 2017 version was updated with data through the end of 2016.

The Clean200 companies are listed by their estimated green revenues in U.S. dollars. The dataset is developed by multiplying a company’s most recent year-end revenues by its BNEF New Energy Exposure Rating mid-point. In cases where companies disclosed their clean energy revenues, this number was verified to ensure consistency and, in some cases, used to override the BNEF data.

To be eligible, a company must have a market capitalization greater than $1 billion (end of Q4 2016) and earn more than 10 per cent of total revenues from new energy sources (which include renewables, energy efficiency and electric cars). The Clean200 list uses negative screens. It excludes all oil and gas companies and utilities that generate less than 50 per cent of their power from green sources, as well as the top 100 coal companies measured by reserves and the top 100 weapons producers along with laggards on tropical deforestation, child or forced labour and companies that engage in negative climate lobbying.

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Marc Grynberg

Chief Executive Officer, Umicore

GICS Industry: Chemicals

The public sector – through smart regulation – can provide an essential framework for the low carbon economy while the private sector is best placed to provide the innovation and technologies to bring the low carbon revolution to life. Umicore provides materials and recycling solutions that enable low carbon technologies. Our cathode materials are key ingredients in determining the performance and cost of the batteries in electric cars and buses. We also contribute to overall lower carbon footprints for the production of precious and scarce metals thanks to our unique recycling processes.

Peder Holk Nielsen

Chief Executive Officer, Novozymes

GICS Industry: Chemicals

We are witnessing a fascinating global shift in the role of businesses. A realization that some of the world’s most pressing challenges – climate change, dwindling natural resources, rising population – both represent risk and some of our biggest future business opportunities.

It is clear that the private sector plays a key role and bears a big responsibility to drive the global sustainability agenda. The Sustainable Development Goals (SDG) point towards the many opportunities for companies that spring from this agenda. They point companies in the right direction to deliver solutions that contribute to sustainable growth. Seen in this way, they are a trillion-dollar business opportunity for the companies that get it right.

The SDGs have guided Novozymes’ own long-term targets for fulfilling the company’s stated purpose of finding biological answers for better lives in a growing world. Among those targets is an ambition to reach six billion people with our biological solutions, deliver 10 transformative innovations, catalyze five global partnerships for change, educate 1 million people about the potential of biology, and save 100 million tons of CO2 through the use of our products – all by 2020. This is our interpretation of where we can make a difference in the world.

Michel Letellier

President & Chief Executive Officer, Innergex Renewable Energy

GICS Industry: Independent Power & Renewable Electricity

Innergex Renewable Energy Inc. has been an active leader in the renewable energy sector since 1990. We are proud of our success in fostering economic development opportunities working in partnership with First Nations and rural communities. We believe that the transition to a low carbon economy is essential to the future growth of not only a healthy society and environment, but a robust and growing economy and that’s’ why we have been and will continue to be committed to produce renewable energy exclusively.

Independent power producers need to keep engaging governments to adopt policies that will make it easier for clean energy to replace traditional sources of energy. We have the ability to leverage our creativity and capital to get clean energy to the market and at the same time help government achieve climate change goals.

We firmly believe that private investment will continue to drive the shift toward a low-carbon future.

Henrik Poulsen

Chief Executive Officer, DONG Energy

GICS Industry: Electric Utilities

Climate change is already impacting millions of lives through extreme weather events and poor air quality. Political agreements to fight climate change are crucial, but corporations also need to take action and do their part. On the demand-side, many leading corporations are setting the example by investing in green power purchase agreements or renewable energy assets. And on the supply-side, energy companies like ourselves must push forward on the shift from fossil fuels to renewables. DONG Energy has come a long way in making offshore wind competitive to fossil fuels, and we recently announced our ambition to completely phase out coal by 2023.

Eric Rondolat

Chief Executive Officer, Philips Lighting

GICS Industry: Electrical Equipment

Philips Lighting contributes to a low-carbon future in two ways. First, we deliver sustainable offerings to our customers. For example, our connected lighting systems can improve energy efficiency up to 80 per cent. No other industry can do that. It therefore was logical to take the second step, making our operations more sustainable. In 2016, we reduced our carbon footprint by 39 per cent to 406 kilotonnes, bringing us much closer to our goal of becoming carbon neutral in 2020.

Together these are cornerstones of our purpose to unlock the extraordinary potential of light through our `Brighter Lives, Better World’ program, which sets ambitious targets on sustainable revenues and operations leading up to 2020. We are proving on a daily basis that the private sector can shape and lead the market for a low-carbon future,” said Eric Rondolat, CEO of Philips Lighting.

Anders Runevad

Chief Executive Officer, Vestas Wind Systems

GICS Industry: Electrical Equipment

To Vestas, the private sector’s role is to ensure that sustainable energy at all times is the obvious choice to satisfy energy demand. The technological progress within the area has been remarkable and onshore wind energy is today often the cheapest energy source available. As products, services and solutions continue to drive energy cost down, the private sector needs to work with policy makers and regulators to ensure energy systems are fit for high penetration of renewables, meaning meeting demand even where the wind is not blowing or the sun is not shining.

The technology of today can with a little help from the technology of tomorrow create a low carbon future – let’s make sure that the power markets are ready.

Jean-Pascal Tricoire

Chairman & Chief Executive Officer, Schneider Electric

GICS Industry: Electrical Equipment

Regarding climate, I am neither optimistic nor pessimistic, I am activist. Climate needs business solutions. By 2040, cities will host 70% of the world population. In the past 20 years, the Internet has connected 3.5 billion people together while, by 2020, it will connect 30 billion devices. Solar and storage systems will account for 70 per cent of new capacity addition by 2040 for rural areas, and 57 per cent of consumers are considering becoming energy self-sufficient, which will lead to the need for more microgrids. At Schneider Electric, we co-create the future for a new energy world. One that is more electric, digital, decarbonized, and decentralized, and we strive to meet the energy challenge — keeping global average temperatures below 2°C increase. We are a pure player in energy transition technologies and our mission is to make sure that Life is On for everyone, everywhere and at every moment.

Frans van Houten

Chief Executive Officer, Royal Philips

GICS Industry: Industrial Conglomerates

We can see the effects of climate change across the world, and we owe it to our children to do something about it. I am therefore proud that last year, Philips launched its new multi-year sustainability program ‘Healthy people, sustainable planet’ which includes Philips’ commitment to achieve carbon neutrality for its global operations by 2020. The five-year program builds on our ambitious mission to improve the lives of three billion people a year in 2025 by making the world healthier and more sustainable through innovation.

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