As the energy world continues its march to greener solutions, a list of publicly traded companies released earlier today argues that making the switch could mean a more financially viable future.
The 2019 Q1 Carbon Clean list, released today by As You Sow, a nonprofit that promotes environmental and social corporate responsibility, showcases the world's top-ranked "clean" companies based on their "total green energy revenue."
Sitting atop the list of 200 companies are Alphabet Inc., Siemens AG, Toyota Motor Corporation, Cisco Systems, HP, Taiwan Semiconductor, Abb Ltd., Ericsson, Unilever, and Banco do Brasil. The quarter's top 10 companies were based on the "amount of absolute revenue they earned from low-carbon products and services" for the six months leading up to Dec. 31, 2018.
During a conference call Tuesday, As You Sow CEO Andrew Behar said the purpose of the list was to "start a dialogue about how investors can co-create a carbon-clean economy and how best to evaluate and highlight companies" already taking steps away from fossil fuels.
The trend away from non-renewable energy can be seen in America's coal industry. Since President Donald Trump was sworn into office, a coal plant has shut down at a rate of one every 15 days. Behar said that trend can also be seen in other major global markets, since renewable energy has become cheaper over the years.
"The transition is happening – the market has spoken, and Clean200 is about acknowledging what the new market is," Behar said. "This is truly a global movement. It's not slowing down – it's only increasing."
Financial data going back to the 1980s further highlights the global decline of fossil fuels. According to the report, oil and gas stocks took up 25 percent of the S&P 500 in 1980. Nearly three decades later, in 2009, that number fell to about 12 percent. Since then, that number has fallen even further to slightly more than 6 percent.
As fossil fuel valuation has dropped over the years, Behar said Clean200 companies have only grown. In the last decade, Clean200 companies have grown in market value "at a 13 percent compound annual growth rate" compared to the 11 percent rate for the Forbes 2000.
"The trendlines are clear," according to the report. "Fossil fuels are disappearing and carbon-free business lines have stepped out of the clean energy niche and now touch the entire economy."
The financial strength of green companies
Based on data from the Bloomberg New Energy Finance database, the most recent Clean200 list is its sixth iteration since its creation in July 2016. Since that time, officials claim the list has "outperformed the S&P Global 1200 Energy Index with a return of 1.29 percent compared to -2.49 percent."
Compared to the broad-market benchmark of the S&P 1200, the Clean200 still has a long way to go, since the former had a 19.67 percent return. That disparity, officials said, stemmed largely from ongoing trade tensions between China and the United States.
If the Chinese stocks are excluded from the Clean200, however, the list's return since July 2016 skyrockets to 20.4 percent, according to officials. Chinese low-carbon leaders, as well as the rest of the country's stocks, also had a terrible year.
"The Clean200 is overweight on growth companies and ... has still continued to outperform when the outlying Chinese stocks are excluded," said Toby Heaps, CEO of Corporate Knights and report co-author. "This suggests markets are re-calibrating the value of stocks, such as clean energy, that offer a superior and enduring value proposition in a low-carbon economy."
Global representation of clean-energy companies
With its new methodology taken into account, the Clean200 features companies from 27 nations across the globe. While China remains the most represented country with 36 companies, its overall share of representation decreased from 35 percent to 17 percent. The United States (34 companies) and Japan (19 companies) rounded out the top three.
While the world's major financial powerhouses naturally top the list, Heaps pointed to a growing trend of smaller European markets joining the roster. Countries like Finland (10), Switzerland (5) and the Republic of Ireland (4) are represented, along with their bigger counterparts in France (8), Germany (11) and Spain (6). Europe made up a large portion of the Clean200 with 64 companies.
"This shows that even little countries can punch above their weight and contribute," Heaps said.
Heaps also pointed out that India was nowhere to be found on the list, which he called "a little concerning ... [because] it is such a pivotal economy."
Looking at the list by the companies' sector, 39 percent (78 companies) of this quarter's entries are industrial. Information technology makes up 20 percent of the list with 40 companies, and utilities companies make up 10 percent of the list with 20 companies.
Making the grade
In order to fit a wider intersection of the global economy, the methodology behind the Clean200 was altered. Using the Corporate Knights Clean Revenue database, the list went beyond just companies that adopted energy efficiency measures, green energy, and zero-emission and hybrid vehicles. Moving forward, the list will include companies that make ecologically and socially sound changes.
Only companies with more than $1 billion in revenue and more than 10 percent in clean energy revenues were considered.
Some of the positive criteria needed to make the Clean200 are "energy efficient products and services, renewable energy production and storage, energy transmission and storage, ZEV vehicles and hybrids, low carbon financial services, low carbon buildings, responsible miners of critical materials for the low carbon economy, forestry companies protecting carbon sinks, ICT leading the way on renewable energy, food and apparel companies with products made of raw materials with lower carbon footprint."
On the other hand, negative criteria that excluded companies include "poor animal welfare, industrial meat production, high monetary fines/penalties/settlements, the manufacture and sale of controversial and conventional weapons/small arms, working to block climate policy, tropical deforestation, support/ownership of for-profit prisons, at least five percent of revenue from countries with oppressive regimes, ties to gambling and pornography, use of child/forced labor, oil and gas companies and ratio of financing for coal/non-renewable resources."
The recent batch of changes resulted in 87 new companies making their debut to the list. The top company on the list, Google's holding company Alphabet, has committed to invest billions "to meet its 100 percent renewable energy target," according to the report.
"It matters a lot what kind of energy ICT companies choose, because they are projected to account for 20 percent of global electricity consumption by 2025," Behar said. "The carbon impact of Google going 100 percent renewable is equivalent to taking 1 million cars off the road permanently. We challenge all ICT companies to do the same and to focus on the privacy issues which have become a threat to their business model."