Tag: Impact Investing

Above: Pharmavite headquarters, maker of dietary supplements MegaFood and Nature Made; LEED v4 Certified and reflect the company’s mission of promoting better health worldwide. © Eric Laignel

There’s renewed commitment from companies and organizations to run their business and operations in more sustainable ways. As communities and consumers begin to demand more from organizations to do more to support their communities, many are not only including sustainability in corporate social responsibility plans but are also are setting ambitious goals to reduce their impacts on the environment. And they’re making real strides in achieving these goals.

For over 25 years, The U.S. Green Building Council (USGBC) has supported its members – which include corporations, small businesses, government entities and nonprofits – to achieve their green building goals through its Leadership in Energy and Environmental Design (LEED) program. LEED is the world’s most widely used green building rating system and promotes the use of strategies that reduce environmental impact, enhance human health and support economic development. Currently, there are over 102,000 LEED certified projects across nearly 180 countries and territories.

USGBC continues to evolve LEED, adapting the program based on public feedback and the latest in green building innovation. Today’s version, LEED v4.1, raises the bar on building standards to address energy efficiency, water conservation, site selection, material selection, day lighting and waste reduction. LEED prioritizes sustainable materials, helping manufacturers to design, produce and deliver building materials that reduce a building’s environmental impact.

Companies and organizations are seeing the benefits of adopting LEED certification into their sustainability plans. With LEED, certified buildings are consuming fewer resources, reducing operating costs, increasing value and creating safer and healthier environments for its occupants.

But the newest version of LEED goes beyond design and construction of the building and takes into consideration the building’s most important asset – the people living, working and using these buildings. In fact, LEED v4.1 supports projects to implement sustainable and healthy building practices to realize environmental, economic, social and community benefits for decades to come. The specific focus on social equity ensures that buildings are not considered in isolation of their communities but prioritize access and inclusiveness for all and ensures buildings are resilient from natural and unnatural disturbances.

Rethinking our Environments

Over the last year, we all had to rethink the environments in which we live and work. USGBC also reflected on the events of 2020 and in response launched its Healthy Economy Strategy, a path for how healthy places and LEED will support recovery efforts as businesses, governments and communities prepare for a post-pandemic world.

To support its members as business and workplaces reopen in the midst of the COVID-19 pandemic, USGBC released the six LEED Safety First Pilot Credits. These credits outline sustainable best practices related to cleaning and disinfecting, workplace reoccupancy, HVAC and plumbing operations, social equity as well as pandemic preparedness and response and support project teams working toward reentry and safe operation.

More than 150 projects have started using the LEED Safety First pilot credits, such as Miron Construction, a century-old private company. It is using the credits in its Madison, Milwaukee, and Green Bay offices, for which it is pursuing LEED Silver certification, and is also implementing them in its LEED-certified offices in Neenah, Wisconsin and Cedar Rapids, Iowa.

The credits will continue to evolve as more communities re-open and as science and information are updated. The LEED Safety First Pilot Credits were designed to be agile so USGBC can update them as we learn more about the virus that causes COVID-19, while also incorporating membership feedback and best practices.

The Race to Net Zero

We’re also seeing companies make commitments to become carbon neutral as the threat of climate change continues to become more prevalent in our everyday lives. Building and construction account for 39 percent of the carbon emissions in the world, according to the World Green Building Council, and the use of energy and water in buildings emits 28 percent of emissions.

The wider green building community is taking notice and setting its sights squarely on zero. Industry groups like Architecture 2030 created the 2030 Challenge back in 2006, and the engineering arm of the building industry issued its own call to zero in the Structural Engineers 2050 Commitment Program (“SE2050”).

USGBC developed LEED Zero, a complement to LEED that verifies the achievement of net zero goals. LEED Zero Carbon recognizes buildings or spaces operating with net zero carbon emissions from energy consumption and occupant transportation to carbon emissions avoided or offset over a period of 12 months. Projects can earn certification in LEED Zero Carbon, LEED Zero Energy, LEED Zero Water and LEED Zero Waste.

And we’re seeing more and more decision-makers ranging from state governments to major corporations pledging to go net zero or net positive. Some of the first LEED Zero certified projects include Entegrity Partners in Arkansas, Discovery Elementary School in Virginia, and even the Curitiba headquarters of Brazilian engineering and green building consulting firm Petinelli.

Corporations are also being recognized for their efforts in taking these pledges and turning them into action. During the 2021 USGBC Live conference in June, Colgate-Palmolive’s Burlington, N.J., facility was recognized for becoming the first site in the world to achieve LEED Zero certification in all four LEED Zero categories.

For decades, the green building industry has demonstrated how sustainable practices are not just beneficial for the environment but also shown how adopting these measures can improve the efficiency and costs effectiveness of an organization’s operations. It’s an exciting time for the building sector. As more groups adopt these measures, the industry will continue to push the envelope, creating innovative ways to build in a smarter and more sustainable way. USGBC will continue to evolve LEED and provide tools to support the industry.

Article by Deisy Verdinez, who supports the US Green Building Council’s communications efforts, working with media and partners to amplify USGBC’s message. Deisy have more than a decade of media and communications experience and has worked with prominent international organizations, nonprofits and federal government agencies.

Who We Are

Ecofin is a sustainable investment firm that’s passionate about striving to deliver strong risk-adjusted returns while making a true impact on the environment and society.

Our roots date to the 1990s as a London-based boutique advisory firm focused on water and energy infrastructure. In the early 2000s, Ecofin began managing money as a utility-focused investment manager and by the end of the decade, was awarded an environment-related mandate from a large Scandinavian sovereign wealth fund.

In 2018, we sought a partner to help fuel our growth, including in the US. We ended up merging with Tortoise, an essential asset investment firm, which had begun shifting its strategic focus to sustainability in 2016. What we found was a shared vision that sustainable investing does not compromise performance to make an impact. Moreover, we shared a view that we are experiencing a sustainability revolution with decades of growth ahead of us, along with exponential impact to the environment, society and in communities.

When we joined Tortoise in 2018, we retained the Ecofin brand as a platform for our products, which now includes all of our sustainability-oriented strategies. Today, Ecofin is the result of a deliberate process between 2016 and 2018 to bring together experts and world-class investors with decades of experience in sustainable investing. Our team invests in both private and public market strategies across the following major themes: climate action, water and social impact.

What makes us different and is the source of our strength, is our talented team. This is demonstrated in our performance and in our perspectives on the future, which aligns with our devotion to the sustainability revolution and our commitment to investments that help solve pressing global challenges, while creating compounding wealth opportunities for our clients.

What We Do

We are a sustainable specialist dedicated to climate action, social impact and water.

First, climate action is the drive to reduce emissions, and includes both the energy transition and waste transition.  This means conventional categories such as solar, wind, hydro and batteries, in addition to the electrification of transport, energy efficiency, waste-to-value (recycling) and waste-to-energy (cleaner fuels such as renewable natural gas).

Second, our investments in social impact focus on providing access to quality education, particularly the underserved population, as well as affordable housing and equal access to healthcare and sustainable communities.

Third, our water investments endeavor to help provide access to clean water and improve water scarcity and sanitation.

Across all themes, we focus on companies and assets that we believe provide investors with the opportunity to compound wealth and preserve capital, while providing a social good.

Why We Do It

Some of the world’s most pressing challenges have been given newfound attention. The devotion to these issues is the bedrock of the Sustainability Revolution. These are long-term secular themes and structural changes occurring on a global scale. We believe we are in the early stages of a multi-decade tectonic shift. The consequences of these changes are shifts in how we make basic decisions, how we consume resources and how we live on the planet. The shift in behavior is also re-shaping the investment landscape.

After decades of debate and procrastination, in our view, it is now clear these forces of change are irreversible and here to stay, strengthened by demands from multiple generations. The power of these forces makes sustainable investing a GARP-like strategy (Growth At a Reasonable Price), and in some cases, tech-like, in which companies’ growth potentials and valuations are misunderstood. They have aggressive growth prospects where value is not appreciated.

Addressing societal and environmental challenges can be a highly profitable business. This is part of the conscious capitalism philosophy that businesses should operate ethically while pursuing profits. Many companies are growing their top and bottom lines and benefitting from rapidly improving growth prospects, multiple expansion and lower cost of debt. Moreover, the expanding pool of ESG capital is bringing greater awareness and receptivity to their stocks. In addition, we think these companies will have better access to talent, and be less exposed to certain regulatory risks and the risks posed by environmental and social variables. The companies that are dedicated to sustainable practices – and providing transparency – have been attracting lower costs of capital and experiencing the early stages of a “sustainability premium”.

Key Drivers of Growth

Three key bills are before Congress that could have a significant impact on the energy sector: The Build Back Better, Green and Clean Future Acts.  Of course, others may well emerge. One of the biggest objectives of the Biden administration is to commit America to a Zero Net Carbon goal by 2050 and to attach some meaningful near-term targets and opportunities to achieve that. Specifically the White House wants 100 percent decarbonization of the utility system by 2035.

These bills will undoubtedly take multiple twists and turns, but with control of the White House and Congress we think it is highly likely some form of these bills will pass. Wealth creation with adding new sources of energy to the system over the past 100 plus years has been bigger than you can calculate. But it was all carbon. Now we’re decarbonizing and we have options because of technology.  We have the will because people, governments and corporations know it’s worth their time.

Looking to the Future

The case for a return-oriented approach to sustainable investing has become clear. The impact of addressing sustainable issues, from climate change to racial and social justice, has become a compelling investment case and, just as important, not factoring these issues represents an investment risk. Societies desire to accelerate the transformation to greener, decarbonized and more sustainable economies. These powerful and secular forces can generate substantial wealth creation and compelling risk-adjusted investment opportunities for both companies and investors for the many decades to come. Ecofin is up for the challenge of striving to deliver strong risk-adjusted returns to investors, while also making a positive impact on society.

Article by Brent Newcomb, President of Ecofin.  Mr. Newcomb joined the firm in 2014 and is a member of the Executive Committee and Ecofin Development Committee and serves as President of Ecofin. He is a member of investment committees for various Ecofin investment strategies as well as Tortoise Essential Assets Income Term Fund. Previously, Mr. Newcomb worked for GCM Grosvenor where he focused on portfolio management. He earned a Bachelor of Science degree in business administration from the University of Kansas and a Master of Business Administration degree from the University of Chicago Booth School Of Business.

Kilroy Realty’s Columbia Square Residence Tower: First apartment rental project to achieve WELL Multifamily Residential Certification

For health and wellbeing in buildings, a wellness certification for a building was a luxury a year ago. Now some consider it a must have, and a way to encourage workers back to the office.

We humans typically spend 90 percent of our time indoors. Perhaps that’s why many us are somewhat complacent about buildings. We generally assume they are safe places to be. The pandemic changed all that. Suddenly, our attention is on whether our immediate environs can make us sick. We are asking questions about air quality, surface cleanliness, and even elevator capacity.

We have known buildings can make people sick for quite some time. The World Health Organization (WHO) coined the term Sick Building Syndrome or SBS in 1986. SBS occurs when occupants experience headaches, allergy-like symptoms, or feel dizzy after spending time indoors. Poorly maintained office buildings are estimated to impact 20 percent of workers. Improvements to air quality, reductions in air pollutants, and better ventilation can reduce symptoms by 70 percent.

SBS is not just a ventilation issue. A building’s stored supply of fresh water can reach unsafe levels of bacteria if the water system is not well maintained, leading to illness and even Legionnaire’s disease.¹ Professor Joe Allen’s book, Healthy Buildings, identifies the nine foundations of a healthy building — ventilation, air quality, health, moisture, dust and pests, safety and security, water quality, noise, lighting and views. They are derived from 40 years of scientific evidence on the factors that drive better health and performance for a buildings’ occupants.

People, Planet, or Profit?

Buildings consume 40 percent of global energy and create 30 percent of global energy-related greenhouse gas emissions.² Being the energy hogs that they are, it was perhaps logical for the early focus of ESG investors to be on energy use reduction. It was also an easy return on investment. Reduce the energy use, reduce the utility bill. That’s good for the planet, and good for profit too. But what about the people?

A healthy workforce is a more profitable one. Healthier workplaces see less employee absenteeism, less sick days, and less employee turnover. Improving workspaces so people are more productive isn’t as easy as changing an incandescent light bulb to LED. But it’s not as hard as we might imagine.

The 3-30-300 rule

This rule of thumb describes a company’s costs for utilities, rent and payroll — all measured per square foot, per year.

A company renting office space for $30 a square foot can typically expect the utility bill to be a tenth of that, or $3. The payroll for the employees occupying that space is on the order of $300 per square foot.

Where then to focus effort?

• 10% saving on utilities nets 30 cents.
• 10% drop in rent saves 3 dollars.
• 10% boost in worker productivity adds $30 dollars of value.

Companies are now beginning to focus more on the potential gains from investing in worker productivity.

The World Green Building Council published reports in 2014³ and 2016⁴ that summarize the dozens of studies that link sustainable workplace design to employee health, well-being and productivity. Case studies highlight the increases in productivity from various improvements:

• Individual temperature control: +3%
• Improved ventilation: +11%
• Better lighting: +23%
• Access to natural environment: +18%

WELL and Fitwel Building Certifications

Traditional green building certifications like LEED and BREEAM have been around for over 25 years with a primary objective to reduce environmental impacts. WELL and Fitwel are newer certifications—both less than ten years old—that focus on occupant health and well-being. Both certifications complement the requirements in a LEED or BREEAM certification, but include more health-focused requirements such as active workstations, proper lighting, low VOC materials, and layouts that promote worker interaction and even hydration. The Fitwel certification process is less onerous than the WELL version — it is both cheaper and an easier to attain. The WELL certification requires on-site verification and is more globally recognized. Building owners pursue the different certifications for different types of projects.

In June 2020 the International WELL Building Institute (IWBI), administrator of the WELL certification, created the specialized WELL Health-Safety rating in response to the COVID-19 crisis. Just 9 months later, over one billion square feet of space had enrolled to be rated. The rapid adoption of this safety rating illustrates how companies are committing to healthier spaces all around the world.

Investing in Health and Well-Being

Forward-thinking real estate companies are investing in upgrades and certifications to make their buildings more attractive to tenants looking for health and wellness. They are banking on employers choosing healthier spaces for their next office lease, and that residents will be looking for these features in their living spaces. Leaders include:

• Empire State Realty⁵, owner 10 million square feet of rentable space across 14 office properties including the iconic Empire State Building, is the first commercial portfolio in the US to achieve the WELL Health-Safety rating across its entire portfolio. They have also Fitwel certified 6 of their NYC properties to date.
• Kilroy Realty⁶ owns 55 properties up and down the West Coast and have more Fitwel certified projects than any other firm in the world, totaling over 43% of their portfolio. They also achieved the world’s first Well certification of a residential rental project, for Columbia Square in Hollywood, CA.
• Dream Office REIT⁷ in Canada, has earned the WELL Health-Safety rating for 25 of its buildings, representing 87% of their gross leasable space.
• Australia’s Charter Hall Group⁸ was one of the first organizations in the world to achieve a WELL Portfolio Score by certifying properties across their organization.
• “Fitwel Champions” are companies using Fitwel at a portfolio scale. Real Estate Investment Trusts (REITs) making the grade include Alexandria Real Estate Equities⁹, Boston Properties¹⁰, Vornado¹¹, and AvalonBay¹².

The Covid-19 crisis has focused the attention of ESG investors on the S pillar (social) more so than ever before. The green building movement is routinely classified under the environment pillar because of the attention paid to energy efficiency. While green building certifications always required health and safety for occupants, the emergence of these new specialized wellness ratings demonstrate the elevation of S toward equal partner in the E, S, and G triumvirate.

Article by Sam Adams, CEO and co-founder of Vert Asset Management. He also chairs the Investment Research Group. Sam leads the development of new products to help make sustainable investing easier for investors. He has been a featured speaker on sustainable investing at financial advisor conferences in the US, UK, Europe, and Australia. Prior to launching Vert, Sam spent almost 20 years working at Dimensional Fund Advisors. He started Dimensional’s European Financial Advisor Services business and led it for 10 years. Sam was part of the team that created Dimensional’s first ESG strategies, the Sustainability Core funds that are offered in the US. He also led the development and launch of Dimensional’s Global Sustainability Core Fund in Europe.

Sam has a BA in Philosophy from the University of Colorado, Boulder and an MBA in Finance from the University of California, Davis. Sam is an avid mountaineer and cyclist, and is very passionate about the environment. He lives in Mill Valley, CA with his wife and three children.

The Vert Global Sustainable Real Estate Fund only holds publicly traded REITs. Fund holdings and sectors are subject to change at any time and should not be considered a recommendation to buy or sell any security.

Mutual fund investments involve risk. Principal loss is possible. Investors should be aware of the risks involved with investing in a fund concentrating in REITs and real estate securities, such as declines in the value of real estate and increased susceptibility to adverse economic or regulatory developments. Investments in foreign securities involve political, economic and currency risks, greater volatility and differences in accounting methods. A REIT’s share price may decline because of adverse developments affecting the real estate industry. REITs may be subject to special tax rules and may not qualify for favorable federal tax treatment, which could have adverse tax consequences. The Fund’s focus on sustainability may limit the number of investment opportunities available to the fund and at time the fund may under perform funds that are not subject to similar investment considerations.

The Vert Global Sustainable Real Estate Fund’s investment objectives, risks, charges, and expenses must be considered carefully before investing. The statutory and summary prospectuses contain this and other important information about the investment company, and may be obtained by calling 1-844-740-VERT or visiting www.vertfunds.com . Read carefully before investing.

The Vert Global Sustainable Real Estate Fund is distributed by Quasar Distributors, LLC.

(above) The Howard Family and their solar PV system

In 2017, Clean Energy Credit Union (“Clean Energy CU”) received its federal charter and became the first “thematic,” online-only, federally insured depository institution with an exclusive focus on clean energy lending. Since then, Clean Energy CU has experienced tremendous success and is influencing both the banking and clean energy sectors. To say that “the time was right” for Clean Energy CU would be an understatement. Understanding its right-out-of-the-gate success requires a look at the underlying market conditions that necessitated its launch.

In the early 2000s, growth in the clean energy sector was driven by improvements in costs, technological innovation, government policy, and public opinion. This growth, however, was outpacing the availability of financing that many consumers and homeowners needed to pursue their clean energy projects. For example, upfront costs for residential solar electric systems, residential geothermal systems, and other green home improvements would typically land in the $10,000 to $50,000 range.

Of the 5,000+ credit unions and 5,000+ banks in the USA, only a handful were paying any attention to the sector. As a result, consumer financing options were typically limited to, and dominated by, VC-backed “fintech” companies such as Mosaic, Sungage Financial, and Dividend Finance, resulting in a dearth of competition to drive down borrowing costs. In contrast, all other segments of the clean energy value chain were laser-focused on reducing costs as rapidly as possible. Financing was the weak link that needed to catch up, and the cheapest form of consumer financing generally comes from federally insured depository institutions (i.e. banks and credit unions), so their entrance into the sector was sorely needed.

Against the backdrop of the clean energy economy were burgeoning concepts like impact investing, conscientious consumerism, and purposeful careers. In that evolving, impact-economy landscape, the need for an “impact banking” or “sustainable banking” option was plain to see. Even so, there were a surprisingly limited number of options for consumers to choose from such as Self-Help Credit Union, Amalgamated Bank, and Beneficial State Bank. Widespread awareness had yet to be raised that where you deposit your money was as important as how you earned, invested, and spent it.

By 2014, there was high, unmet demand for affordable clean energy loans juxtaposed with the dire needed to spark an “impact banking” movement. It was then that a group of volunteers, comprised mostly of clean energy professionals and cooperative enthusiasts, convened to address these needs. Upon learning that credit unions are, by definition, not-for-profit and member-owned cooperatives, they saw that the path forward was not actually a stockholder-beholden bank model whose mission would be subordinated to profit-maximization motives, but rather what would become Clean Energy CU.

The operating model is built entirely around the belief that everyone should be able to participate in the clean energy movement—whether as a user, an investor/depositor, or both.  Clean Energy CU offers a much-needed value proposition: member deposits will earn a competitive interest rate, be federally insured, and be used exclusively to help others pursue their clean energy or energy-saving projects via market-leading, custom-tailored loan terms.

In early 2018, after a three-year federal charter application process, Clean Energy CU opened its virtual doors. As a federally chartered credit union, it is tax exempt and deposits are federally insured, thereby giving it the lowest possible cost of capital. As a cooperative, it is democratically owned and governed by its members, and the primary reason for its existence is to serve its mission and members. An online/mobile-only services platform eliminates the need for expensive brick-and-mortar branches – and their associated overhead – and helps lower operating costs. Its focus on clean energy lending enables critically important market expertise, awareness, and adaptability.

Services were initially limited to savings accounts, clean energy CDs, and an array of clean energy loan products (e.g. e-bikes, EVs, solar electric systems, and geothermal systems). Philanthropic support that included a $1M grant from the William and Flora Hewlett Foundation in 2019 provided a substantial springboard. To date, over 4,500 clean energy loans totaling over $70M have been funded for members throughout the country without a single delinquency or default. Clean Energy CU continues to grow rapidly, and its services now include checking accounts, debit cards, IRAs, and Money Market accounts. Next, Clean Energy CU is planning to offer green home mortgages, credit cards, and clean energy loans to businesses and nonprofits.

Clean Energy CU is also helping 45+ other credit unions learn about clean energy lending via “loan participations.” By selling portions of its loan pools to other credit unions, Clean Energy CU is able to lend far beyond what its start-up balance sheet would allow. Participating credit unions are able to invest their excess cash, diversify their loan portfolios, and gain experience with an exciting new asset class. Seeing firsthand how well these loans perform on their own books helps other credit unions to convince their own boards and regulators that clean energy loans are more valuable and less risky than previously thought, partly because they inherently save borrowers money (e.g. in the form of lower utility bills and fuel costs) which then increases the borrower’s ability and motivation to make their loan payments. In turn, this encourages more credit unions to do their own clean energy lending, thereby spurring competition and driving down financing costs to fund the rapidly growing clean energy movement.

Importantly, Clean Energy CU is committed to JEDI (Justice, Equity, Diversity, and Inclusion). With over half of its members from low-income census tracts, the National Credit Union Administration recognized it as a “low-income designated credit union” in 2020. Loan programs are under development to favor underserved demographics by offering discounted loan terms to low-to-moderate income borrowers and prioritizing both BIPOC populations and those vulnerable to pollution. As a precursor to these new loan programs, Clean Energy CU recently announced a new program with fellow cooperative, Organic Valley, to offer discounted loan terms to help its membership of organic family farms use clean energy, save energy, and save money.

Clean Energy CU may be the first of its kind, but it won’t be the last. New fintech companies and banks with similar goals are popping up like Aspiration, Climate First Bank, and Atmos. Clean Energy CU aims to help grow the clean energy movement and disrupt the entire retail banking sector which is receiving increased pressure to stop its fossil fuel lending and help finance climate change mitigation. With all that it has achieved in just its first three years of operation, we’re incredibly excited about what Clean Energy CU will accomplish next.

Article by Blake Jones, co-founder and volunteer board chair of Clean Energy Credit Union. Blake is also a co-founder of three other cooperatives: (1) Namasté Solar, an employee-owned cooperative; (2) Amicus Solar Cooperative, a purchasing cooperative; and (3) Kachuwa Impact Fund, an investment cooperative and impact investing fund.