Ranked: America’s Cleanest Big Companies
In previous stories, I looked at the worst banks for climate change and share price performance of climate A-listers vs climate D-listers. In this story, the focus is squarely on the positives — the American companies with the most clean revenues.
The Global Clean 200
This story is prompted by the recent release of the 2020 Clean 200 by Corporate Knights and As You Sow. This is an annual global list of the 200 companies with the most clean revenues.
To be eligible for consideration a company must have at least US$1 billion in revenues, of which at least 10% must be derived from clean sources. Over 500 companies globally met these criteria.
Negative screens are used to preclude greenwashing. For example, utilities are excluded if they earn less than 50% of their revenues from clean sources, irrespective of how much clean revenue they earn, as are companies that earn 30% or more of their revenues from coal.
Although the Clean 200 focuses on the E in ESG, there are screens against the most egregious S and G performers. For example, weapons manufacturers and companies in the bottom quartile for fines, penalties, and settlements as a percentage of revenue. These screens knocked out Honeywell (weapons), United Technologies (weapons), and 3M (fines).
Globally, 59 companies that met the revenue thresholds were eliminated by screens.
What are clean revenues?
The definition of clean revenue is sector specific. For example, in banking, it means revenue from loans for renewable energy. In the IT sector, clean revenue includes revenues from data centers that are 100% powered by renewable energy. The following table shows more examples.
Of the Clean 200, 39 companies are based in the USA (up from 34 in 2019) — the most for any country. Although the Americas, with 51 entries, lag behind Asia (79) and Europe (70).
Join me know as I count down the US top 10 before revealing the full US top 20.
10. Sims Metal Management
Total revenue: $4.6B Clean revenue share: 100% Clean revenue: $4.6B
Sims has been recycling since before it was a thing. In 1917 Albert Sims began collecting scrap metal for recycling in Sydney, Australia — by bicycle. How green is that?
9. Ball Corp
Total revenue: $11.6B Clean revenue share: 40% Clean revenue: $4.7B
Ball Corp produces metal packaging for the beverage, food, personal care, and household products industries globally. Clean revenues are derived from recyclable containers and circular economy activities. It also has an aerospace division that builds satellites for environmental monitoring.
Total revenue: $14.7B Clean revenue share: 38% Clean revenue: $5.6B
Ecolab provides water, hygiene and energy technologies and services globally. Conserving water is one of Ecolab’s core competencies.
7. Hewlett Packard Enterprise Co
Total revenue: $20.9B Clean revenue share: 23% Clean revenue: $7.1B
Hewlett Packard Enterprises was spun out of HP in 2015 to create a specialized IT services business. Clean revenues are derived from a circular economy approach to IT equipment which embraces refurbishing, recycling, energy efficiency and powering data centers sustainably.
Total revenue: $18.5B Clean revenue share: 47% Clean revenue: $8.8B
Kimberly-Clark makes a huge range of products from natural or synthetic fibers, including disposable diapers, baby wipes, feminine care products, facial and bathroom tissue, paper towels, napkins. A large portion of natural fiber is sourced from sources certified for sustainability by Forest Stewardship Council (FSC) and Programme for the Endorsement of Forest Certification (PEFC).
Total revenue: $70.8B Clean revenue share: 17% Clean revenue: $12.3B
Intel is a major voluntary purchaser of green power in the USA and makes extensive use of alternative energy sources on site. Intel presently returns 80% of water used back to the community in pure form — it aims to get to 100% by 2025.
Total revenue: $21.5B Clean revenue share: 100% Clean revenue: $21.5B
Electric cars and rooftop solar and storage are clean revenues by definition. This is inconsistent with some of the other industry sectors where the supply chain is used to determine whether the revenue is clean. I assume manufacturers of electric cars and locomotives get a pass because their products displace GHG emitting alternatives.
Total revenue: $49.3B Clean revenue share: 55% Clean revenue: $27.2B
Cisco makes much of the plumbing that powers the internet and the cloud. All products are returnable resulting in 14,000 tonnes of products being reused, refurbished, or recycles annually. Over 40% of energy used is renewable.
2. HP Inc.
Total revenue: $58.5B Clean revenue share: 71% Clean revenue: $41.6B
Recycles 400,000 tonnes of hardware and supplies annually. Zero deforestation with HP brand paper. c.50% of electricity used is green. Has extensive goals and reporting regarding post-consumer recycled content in products, GHG emissions intensity internally and in the supply chain, water consumption.
Total revenue: $136.8B Clean revenue share: 85% Clean revenue: $116.9B
Best known as the parent of Google, most of who’s revenues are generated in data centers. Data centers are extremely energy-intensive, globally consuming more than 3% of all electricity. Since 2017 Google has purchased enough renewable energy to match its worldwide usage, making it the world’s largest commercial purchaser of renewable energy.
The US Clean 20
Herewith the 2020 US Clean 20. (Revenue data are for the 2018 financial year.)
Half the US top 20 are new to the Clean 200 this year. Also the clean revenue threshold for the US top 20 this year is $2.8 billion — up 75% from the $1.6 billion threshold in 2019. These changes are due in part to increasing clean revenues. But in many cases changes in the Clean 200 and US top 20 are a result of better disclosure by companies.
Show me the money
How do shareholder returns for companies in the US Clean 20 compare with the market? I’m glad you asked.
I looked at the returns for the US top 20 from last year’s Clean 200. These are the returns you would have made between February 2019 and now if you had bought shares in the US top 20.
The 2019 US Clean 20 returned 23.6% while the S&P 500 returned “only” 21.2%. Sure Tesla was a breakout — but exactly half of the 2019 US Clean 20 beat the S&P500. That is certainly an intriguing result when many active managers are struggling to beat the S&P 500.
Are we entering the era of “green alpha”? In my previous story, I found that companies with poor climate disclosures underperformed the market over a range of time frames. As I hypothesized in that story:
It is easy to imagine ways that differences in climate policy and disclosure might lead to differences in share price performance:
If a company is not addressing climate risks, what other risks might it be failing to address?
A company taking a leadership position on climate disclosure and policy is more likely to position itself to take advantage of market opportunities created by climate change.
Differences in approach to climate change may be proxies for differences in a range of other important competencies such as strategic planning, governance, and board oversight.
As always, don’t try this at home. Seek professional advice before making investment decisions. If your financial advisor isn’t across ESG (environment, social, governance) investing, message me and I’ll hook you up with one who is.
Heaps, Toby, Wendy Shen-Juarez, and Andrew Behar. “2020 Clean200 Webinar and Slides.” As You Sow. Accessed February 19, 2020. https://www.asyousow.org/report-page/2020-clean200-webinar.