Carbon Clean 200
Investing in a clean energy future
Over the past years, a growing movement of investors representing trillions of dollars in assets under management have divested some portion of their fossil fuel investments. But where to invest this capital? The corollary of divesting fossil fuels is re-investing in the clean energy future. As an invitation to a larger discussion of how we can invest in this future, As You Sow and Corporate Knights created the Carbon Clean 200 — a list of 200 publicly traded companies that are leading the way with solutions for the transition to clean energy.
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2019 Q1 update

We are pleased to present the 2019 Q1 Carbon Clean 200™ 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 we have released an updated one every six months. In that time a great deal has changed in the world. The march away from the high carbon economy has accelerated in tandem with the march toward a clean economy.

Since Trump’s inauguration, a U.S. coal plant has been shut down every 15 days, with 2018 being the nation’s top coal-plant closing year ever. This is happening for the same reason that China and the entire developing world installed more new renewables than fossil power last year for the first time ever and why 42 percent of global coal fleets are unprofitable: Renewables are now cheaper in many major power markets. And we’re just at the beginning of the innovation S-curve for renewables and storage.

In other portents for the future, according to Accenture, 2018 likely marked the peak production of internal combustion engine vehicles which are imminently set to be made obsolete by cheaper electric and fuel cell vehicles. Meanwhile, at least nine countries including China and India have telegraphed they will be banning fossil fuel burning vehicles and other jurisdictions around the world are beginning to put policies in place to make it so. In addition, as a result of the march of technology, zero-emission vehicles will be cheaper right off-the-lot before accounting for the fuel savings and any subsidies, as soon as 2024 according to Bloomberg.

In terms of oil and gas stocks, they are rapidly fading away. In 1980, oil and gas stocks made up 25 percent of the S&P 500. By 2009, the sector had halved to 12 percent, and since 2009 they have halved again to just over 6 percent. At the current rate of decline, Energy stocks may be less than a rounding error of major benchmarks inside the next decade.

While fossil fuels have been burning out, the current crop of the Clean200™ companies has been experiencing higher growth than the Forbes 2000 list of the world’s largest stocks. Over the past ten years the Clean200 companies’ market value grew at a 13 percent compound annual growth rate versus 11 per cent for the Forbes 2000 over the same time period.

The trendlines are clear. Fossil fuels are disappearing and carbon free business lines have stepped out of the clean energy niche and now touch the entire economy.

In line with these changes in the world, beginning in this version of the Clean200, we have adapted our methodology to reflect the broadening of this cross-sector grouping of companies. These changes mean that we are now applying a new carbon free definition that captures a larger portion of the economy beyond energy efficiency, green energy, and zero emission and hybrid vehicles. We will now include banks that are financing the low-carbon solutions; real estate companies leading the way on low-carbon buildings; forestry companies protecting carbon sinks; responsible miners of critical materials for the low carbon economy; food and apparel companies with products that are primarily made of raw materials with a significantly lower carbon footprint; and energy-hungry Information and Communications Technology (ICT) companies that are leading the way on renewable energy while also being best-in-sector according to currently accepted privacy benchmarks.

The updated criteria has broadened the Clean200 so it is now more diverse from a sector perspective and more representative of the breadth of the low carbon economic transition.

It has also resulted in what may be a surprise at the top of the Clean200 list: Alphabet, the holding company for Google.

As per the updated methodology, Internet and Data Services companies (a subset of ICT) are considered “green” or “clean” if they fulfill two tests. Number 1: They must derive 100 percent of the energy they consume from renewable sources. Number 2: They must rank in the top quartile among peers on privacy, according to the best available benchmark, Ranking Digital Rights. Alphabet has invested billions of dollars over the past few years to meet its renewable energy target. Also, Google ranks number one among its peers on privacy – we acknowledge that being number one on privacy is far from perfect and are looking for ways to improve this benchmarking.

From a carbon emissions perspective, Google’s decision to go 100 percent renewable as compared to a business-as-usual scenario, removes five million tonnes of carbon emissions from the atmosphere every year. That is no small beans. It is equivalent to taking one million cars off the road or shutting down a quarter of Suncor’s operations, one of the largest oil sands companies in the world.

From a big picture perspective, it matters a lot what kind of energy ICT companies choose because they are projected to account for 20 percent of the entire global electric grid by 2025.

We encourage and challenge all ICT companies, many of which have cash burning a hole in their pockets, to go 100 percent renewable and to up their game on privacy, which will only become more important as data replaces oil.

2019 Q1 performance

Since inception (July 1, 2016), the Clean200 is ahead of its fossil fuel benchmark (S&P Global 1200 Energy), but behind the broad market benchmark (S&P 1200), mostly due to sub-par China performance amidst the simmering trade war with the U.S.

When excluding the Chinese stocks from the Clean200, the Clean200 ex-China moves into pole position ahead of its broad market benchmark.

Clean 200 vs. S&P Global 1200 Energy

When excluding the Chinese stocks from the Clean200, the Clean200 ex-China moves into pole position ahead of its broad market benchmark

Overall, the model presented in the form of the Clean200 continues to indicate that demand and market forces are driving growth for low carbon companies. Since its inception two and a half years ago, the Clean200 has outperformed by 3.78 percent against the S&P Global 1200 Energy Index. The Clean200 ex-China which returned 20.4 percent since inception beats the S&P Global 1200 Index by 0.73 percent over the same time period. It will be very interesting to see how the trends unfold over the next few months.

Methodology

The Clean200 are the largest 200 public companies ranked by green energy revenues. It was first calculated on July 1, 2016 and publicly released on August 15, 2016 by Corporate Knights and As You Sow. The current list has been updated with data through the end of 2018 (December 31, 2018).

The Clean200 companies are listed by their estimated green revenues in USD. The dataset is developed by multiplying a company’s most recent year-end revenues by its clean revenue estimate, primarily sourced from Corporate Knights Research supplemented by FactSet, Bloomberg BNEF, and FTSE Russell data. In order to be eligible, a company must have USD revenue of at least $1 billion (most recent available fiscal yearend data) and earn more than 10% of total revenues from clean sources.

The Clean200 uses negative screens. It excludes all oil and gas companies and utilities that generate less than 50 percent of their power from green sources, the top 100 coal companies measured by reserves, the top 100 oil & gas companies as measured by reserves, as well as all fossil fuel companies, majority fossil-fired utilities, pipeline and oil field services companies, and other fossil fuel-related companies screened on As You Sow’s Fossil Free Funds. In addition, the Clean200 excludes weapons companies including major military arms manufacturers found on the SIPRI Top 100 arms-producing and military services list, as well cluster munitions, nuclear weapons, and civilian firearm manufacturers screened on As You Sow’s Weapon Free Funds. The Clean200 also exclude palm oil producers that are screened on As You Sow’s Deforestation Free Funds, companies using child or forced labor, and companies who engage in negative climate lobbying are not included.

Visit AsYouSow.org to see the methodology and the full list of 200 companies

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