The plant – operated by CertainTeed Canada, a division of the French construction giant Saint-Gobain – will transition from the use of fossil fuels to clean power provided by Hydro-Québec and increase its use of recycled materials to cut its reliance on incoming shipments of virgin gypsum.

Such carbon-reduction initiatives are becoming increasingly common among industrial operators, data-centre developers and electrical utilities, all of which are pushing to find efficiencies to cut their emissions in response to regulatory, consumer and investor pressure. Cities, countries and corporations are looking for ways to get ahead of the climate crisis, with a range of measures driving green trends behind the scenes.

Herewith, Corporate Knights’ annual survey of important trends for 2025:

More cities will be designing for extreme heat

The summer of 2024 was the hottest on record, and there’s every reason to expect more of the same this year, with similar results. A growing number of urban regions that now endure extended periods of extreme temperatures are looking at responding more proactively to deadly heat waves. As Corporate Knights reported last year, several city regions have appointed “chief heat officers” to spearhead a range of measures, from public health initiatives to safety practices for firms with outdoor employees, and many more municipally driven extreme-heat strategies will roll out 2025.

Indeed, planners, designers, landscape architects and municipal governments are stepping up their efforts to alter or adapt the built forms in cities in 2025 to mitigate the urban heat-island effect. From the construction of shade structures in public spaces to the use of light-coloured exteriors on buildings and white paint on paved surfaces, expect to see more of them in urban centres around the world. Many cities are also adopting more aggressive approaches to tree planting on streets, along bike paths and in parks, creating more green corridors and replacing hard impervious surfaces.

More new builds will also have fewer staircases. Some North American jurisdictions (British Columbia and Washington State, among others) are easing up on fire codes to allow single-stair apartment buildings, which are commonplace in much of the world. This reform provides a range of benefits, not least of which is cross-ventilation within individual apartments, reducing the need for air conditioning.

Power-hungry data centres face a reckoning

The Canadian government’s decision, late in 2024, to incentivize major pension plans to invest up to $15 billion in “green” data centres is the latest piece of evidence about the growing recognition of artificial intelligence’s heavy carbon footprint. The program is aimed at encouraging data-centre developers and tech giants to use low-carbon electricity to power the huge amount of cooling required to allow these vast server farms to operate safely.

There have been several recent developments on this front, including Microsoft’s move, announced in September, to purchase 20 years of electricity from a refurbished reactor at Three Mile Island. “The agreement is intended to provide the company with a clean source of energy as power-hungry data centres for artificial intelligence (AI) expand,” the BBC reported.

Other developers are anticipating the arrival of small nuclear reactors as a means of providing low-carbon electricity, although these modular plants are still 10 to 15 years from coming online.

As data centres pop up in urban areas, some architects and critics have called out the monolithic and dehumanizing design of these “anti-monuments,” while data-centre developers are looking to reduce embodied carbon, using modular construction techniques and even employing green materials like cross-laminated timber.

Such changes reflect the data-centre industry’s awareness that increasingly stringent regulation is on the way. Starting in fall 2024, the European Union is targeting data centres with tougher regulations, including the disclosure of energy and water consumption. Other jurisdictions, including Australia, Singapore and a growing number of U.S. state governments, are following suit with their own regulations.

Giant ‘grid’ batteries are making renewables more viable

As wind and solar installations account for an ever-larger supply of renewable electricity, some utilities and systems operators have realized they need to figure out how to make better use of these low-cost/low-carbon sources. Systems operators for decades stored power behind hydro dams, using the renewable electricity to pump water up into reservoirs.

But in recent years, so-called long-duration energy storage (LDES) has become an increasingly viable low-carbon alternative. Citing International Energy Agency forecasts, The Economist reported in November that grid storage has become the fastest-growing energy technology, with 80 gigawatts forecast to be added in 2025, three times the level achieved in 2021. (For comparison, Canada has electricity capacity of 149 GW nationwide.)

The idea behind grid storage is to create what are effectively giant banks of batteries that can be recharged with renewable power when the wind blows and the sun shines. These batteries can then be discharged over the course of eight or 12 hours, thereby providing backup low-carbon power to the grid at scale.

China has the world’s largest supply of grid-storage capacity, but other jurisdictions will be racing to catch up over the next decade.

In the United States, California leads the pack, announcing the procurement last year of two gigawatts of 12- to 24-hour LDES, to be built out in the 2030s. Which is critical, since California requires solar and energy storage in new homes.

Elsewhere, Australian authorities are also commissioning several LDES projects, typically providing hundreds of megawatts of capacity using various technologies, including a 200-megawatt compressed air system with eight hours of capacity, developed by Toronto-based Hydrostor.

Tariffs will help fight climate change

At a period when the incoming Trump administration has threatened large-scale tariffs as a means of driving investment into the United States, the European Union’s carbon border tax, or “carbon border adjustment mechanism” (CBAM), adopted in 2023, will become a hot topic of diplomatic debate as the 27-nation bloc spends this year preparing for the launch in 2026.

An EU innovation, CBAMs are essentially carbon levies on imported goods and commodities, designed to mitigate against carbon “leakage,” or the problem of importers in high-regulation regions bringing in materials from countries with lax carbon policies. A few jurisdictions, such as Brazil and the United Kingdom, have followed suit, while the Canadian government is considering its own version, although, like so many trade-related files, this one is up in the air.

Not surprisingly, this policy approach received a good deal of pushback last year from Brazilian and Indian steelmakers. It seems likely that the chorus of objections will grow louder this year as EU member states ramp up their CBAM regulations.

Either way, CBAM will play a key role in 2025 in aligning trade policy with the broader climate targets.

Given the anticipated political headwinds facing climate policy, 2025 may be the year in which rapidly maturing climate technologies and resiliency solutions will be called upon to prove their own significance in combating extreme weather and intensified stresses on our energy systems.

John Lorinc is a Toronto journalist, author and editor. He writes about cities, climate and cleantech.

The post Four climate-saving trends for 2025 appeared first on Corporate Knights.

It is true that many asset managers have taken steps to integrate ESG data into the way they manage their portfolios, but the vast majority of the world’s $60 trillion in assets under management is not subject to this type of analysis.   

The mainstream’s skepticism about ESG is understandable. On a theoretical level, it is not always obvious that a good ESG performer would be a good portfolio performer. And even for those investors that are keen to explore ESG investment strategies, there are other, more practical challenges. For instance, ESG data has only been around for about a decade – a pittance in an industry that spans more than 140 years.

While this doesn’t mean that ESG analysis isn’t valuable, or that companies with good ESG performance cannot be good financial bets, it does mean that investors can’t conduct the kind of long-term financial backtests that they’re accustomed to building to evaluate new investment theses.

Another challenge is that many of the third-party vehicles that investors have historically used to integrate ESG into their portfolio decision making, including ESG ratings, are often “black boxes” – that is, they’re difficult for outsiders to break down, test and understand.  

To help investors overcome some of these barriers, Corporate Knights Capital built a new application that we call Sustainable Beta – what we believe to be the world’s first interactive sustainable portfolio construction tool. It’s not a panacea, we know, but it can help demystify sustainable investment strategies and, perhaps most importantly, it can transparently show how ESG data can be used to boost – not harm – portfolio performance.

(To test-drive Sustainable Beta, go to corporateknightscapital.com, select “Our Services” and then go to “Portfolios.”)

Users of Sustainable Beta are invited to build their own equity portfolios using five different inputs. First, select your market. Options include Australia, Canada, Europe, Japan and the United States. Next, select the specific ESG factor you would like to test. Five factors can currently be tested: Board Diversity, Carbon, Energy, Water and Tax.

Once these two fundamental decisions are made, you then decide how the portfolio should be normalized (e.g., how the ESG factor should be measured), how it should be weighted (e.g., by market capitalization or equal weight) and how often you would like it to be rebalanced (annually, semi-annually, quarterly or monthly).

After selecting all of the inputs and generating a portfolio, you can see how the portfolio would have performed against the major benchmark in your selected market (e.g., S&P 500 in the United States) from as far back as January 2008 up to the end of June 2014. 

The tool typically builds portfolios by scanning all companies that are available in the chosen market and selecting those that perform favourably on the chosen factor.  

Many of the portfolios that can be built on Sustainable Beta fail to beat their benchmark. For instance, an annually rebalanced market capitalization-weighted portfolio of Canadian carbon leaders (normalized by sales) would have underperformed the S&P/TSX Composite by 9.9 per cent from January 2010 to June 2014.  

But some portfolio permutations significantly outperform their benchmarks. For instance, an annually rebalanced, equally weighted portfolio of U.S. carbon leaders (normalized by number of employees) would have outperformed the S&P 500 by an astonishing 41 per cent from January 2008 to June 2014.

More analysis would be needed to properly attribute this outperformance – the weight scheme, for example, is sometimes a more significant determinant than the sustainability factor – but these and other results certainly call into question the orthodoxy that sustainable investing is doomed to underperform.  

Sustainable Beta is unique because of its transparency and flexibility. We are not aware of any other publicly available portfolio construction tool that lets users explore such a wide range of sustainable investment strategies. If it can play some role in the mainstreaming of ESG investing, it will have been a success.

We encourage you to give it a try.

The post Create a sustainable portfolio appeared first on Corporate Knights.

The Montreal Carbon Pledge launched today at the PRI conference in Montreal, which will encourage institutional investors to measure and publicly disclose how much carbon is contained within their investment portfolios on an annual basis.

The pledge adds to existing measurement tools, reporting standards and low-carbon investment options that have created a “perfect storm” for building a low-carbon economy, says Toby Heaps, Chief Executive Office of Corporate Knights.

This comes only days after Ban Ki-Moon, Secretary General of the United Nations, called on the private sector at Tuesday’s Climate Summit in New York City to “redirect investment commensurate with the scale of the challenge,” including disclosing carbon asset exposure.

“Climate change is a risk to businesses and financial markets everywhere,” said Ki-moon on Tuesday. “It threatens to undermine financial resilience, and efforts to alleviate poverty and maintain sustained economic growth.”

While he said carbon pricing was a critical first step, it would be insufficient if not complemented by urgent direct action. And with over $75 trillion (U.S.) in investable assets, institutional investors play a leading role in the transition to a climate resilient economy.

That is why the Montreal Carbon Pledge is aiming to get commitments from portfolios worth $3 trillion before the United Nation climate meeting in Paris in December 2015.

The PRI – an international network of investors supported by the United Nations, which represents more than $45 trillion (U.S.) in assets under management – will manage the online portal where investors can endorse the Montreal Carbon Pledge, report the size of their portfolio’s carbon footprint and list their carbon-reduction targets.

These actions will not only help to mitigate the climate crisis, they also have the potential to generate new markets and new employment opportunities, as well as generate economic growth while meeting our social and environmental needs, said Ban Ki-moon on Tuesday. But, in order for this to happen, investors need to enter a new era of global cooperation, he said.

The Montreal Carbon Pledge will bring institutional investors together so that they can “translate climate talk into walk,” said Fiona Reynolds, Managing Director of the Principles for Responsible Investment in a statement.

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