A report released today from As Yow Sow and Corporate Knights reveals that a list of 200 clean energy companies known as the Carbon Clean 200™ (Clean200™) show a simulated annualized return of 21.82 percent over the past decade – nearly triple that of the Carbon Underground 200™, a list of fossil fuel companies being targeted for divestment, which generated a 7.84 percent annualized return over the same period. The Clean200’s high figure was largely due to the explosive growth experienced by Chinese cleantech firms, but firms outside of China still had figures superior to the S&P 1200 global benchmark and Carbon Underground 200.
The Carbon Underground 200 compares holdings against the 100 largest coal and 100 largest oil and gas companies as measured by proven reserves. As You Sow’s Fossil Free Funds online tool flags mutual funds with holding in these companies to help individuals and workplaces divest.
The Clean200, on the other hand, ranks the largest publicly listed companies worldwide by their total clean energy revenues as rated by Bloomberg New Energy Finance (BNEF). To be eligible, a company must have a market capitalization greater than $1 billion as of the second quarter of 2016, and earn more than 10 percent of total revenues from clean energy sources.
Over 70 of the companies on the list receive a majority of their revenue from clean energy. The top ten of these are Vestas (wind power), Philips Lighting (LED lighting), Xinjiang Gold-A (wind plants), Tesla Motors (electric vehicles), Gamesa (wind turbines), First Solar (solar modules), GCL-Poly Energy (solar grade polysilicon), China Longyuan-H (wind Farms), Kingspan Group (Insulation and building envelopes), and Acuity Brands (LED lights).
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The list excludes all oil and gas companies and utilities that generate less than 50 percent of their power from renewable sources, as well as the top 100 coal companies as measured by their reserves. Furthermore, the Clean200 excludes companies profiting from weapons manufacturing, tropical deforestation, the use of child and/or forced labor, and companies that engage in negative climate lobbying. In the third quarter of 2016, these reasons collectively excluded 79 companies, 59 of which were utilities that derived less than 50 percent of their revenue from green sources and 10 of which harm tropical forests. Those engaged in deforestation are also included in the Deforestation Free Funds web tool recently released by As You Sow and Friends of the Earth.
As You Sow CEO Andrew Behar, who is one of the report’s co-authors, explained that these exclusions were made because the list is intended to contribute to the conversation about what companies will be part of the clean energy future, and what will define them.
“The Clean200 turns the ‘carbon bubble’ inside out,” Behar added. “The list is far from perfect, but begins to show how it’s possible to accelerate and capitalize on the greatest energy transition since the industrial revolution.”
Indeed, the report sends a clear message: the notion that investors must sacrifice returns when investing in clean energy is outdated.
“The Clean200 nearly tripled the performance of its fossil fuel reserve-heavy counterpart over the past ten years, showing that clean energy companies are providing concrete and measurable rewards to investors,” said Toby Heaps, CEO of Corporate Knights and another co-author of the report.
“Many clean energy investments are profitable now, and we anticipate that over the long-term their appeal will only go up as technologies improve and more investors move away from underperforming fossil fuel companies,” Heaps added.
At the same time, the Clean200 is not intended to be an index nor stock-pick-list, nor is the report an attempt at providing financial planning, legal or tax advice. The performance analyses were based on ‘snapshot in time’ analysis of current constituents as the BNEF clean energy revenue exposure database is new and does not go back in time. It also introduces a survivorship bias since stocks which do not currently exist (because they have failed, for example) are excluded from historical analysis; this bias can result in the overestimation of past returns. More information on the methodology used to develop and assess the Clean200 can be downloaded in the full report, Carbon Clean 200: Investing in a Clean Energy Future.