Green REITs: Sustainable Investments for your HNW/UHNW Clients
Green Investments New Normal
Because of global climate change, most of us in the business know that green investing is the new normal. Climate change isn’t something that is going to happen in the future. It is happening now, and the globe is warming far faster than predicted a few years ago. [1] We can see either personally or through the media the effects of climate change, so green investing is top of mind. You, as a Financial Advisor, have an excellent opportunity to pitch green investments.
“Climate change is already affecting every region of our planet, and every fraction of additional warming will increasingly affect every region in multiple ways…” [2]
High-Net-Worth/Ultra-High-Net-Worth (HNW/UHNW) Clients Want To Know About Green Investments
Wealthy clients want to know how to add green investments to their portfolios. Under the Paris Agreement, to which the United States is a signatory, the nations of the world have set a fixed goal of reducing carbon emissions by 45% by 2030 and achieving net-zero carbon emissions by 2050.
Creating A Sense Urgency To Buy
You can create a sense of urgency for buying because we have less than eight years to reach the first goal of a 45% reduction in carbon emissions. The hour grows late. The time is now, or their children and grandchildren will inhabit a crippled planet. To avert the most severe impacts of global warming and preserve a livable planet, we absolutely must reach the goal. [3]
Record-Breaking High Temperatures Are Already Occurring Worldwide
Record-breaking high temperatures have been measured worldwide, including parts of the Arctic, where daytime temperatures hit 104 degrees Fahrenheit in 2020. [4] NOAA (National Oceanic and Atmospheric Administration) reported July 2021 was the world’s hottest month ever recorded. [5]
The Greening of REITs: EnergyStar And Commercial Buildings
Real Estate Investment Trusts (REITs) have long been a favorite for investors seeking income. Because REITs must pay out 95% to 100% of their net income to shareholders, they have every reason to reduce costs by using energy more efficiently. “In 2020, the ENERGY STAR program for commercial buildings helped businesses …avoid $16 billion in energy costs.” Remember, this money drops directly to the bottom line.
Buildings Comprising 1/4 Of Commercial Floorspace Using EnergyStar Software
In 2021 more than 280,000 commercial buildings used EnergyStar’s free Portfolio Manager software to track energy use. [6] This works out to 1/4 of the commercial floorspace in the US. More than 39,000 commercial buildings have received an EnergyStar certification and on average certified buildings use 35% less energy than non-certified buildings. [6]
Buy REITs With Energy Star Certified Buildings
To add green investments, you want your clients to buy REITs that hold an extensive portfolio of EnergyStar certified buildings. Because there are so many ways to use energy more efficiently in commercial buildings, a certified building shows the owners have a strong interest in reducing energy consumption and limiting carbon discharge. Once your building receives an EnergyStar certification, you have to annually provide data to keep the certification.
How To Find Green REITs
There are many green REITs, but you can start with thirteen, which earned the EnergyStar Partner of the Year award in 2021. (Cannon is not a financial services firm, and we do not endorse or recommend any of these securities). You can find the list here.
Resources:
[2] https://www.scientificamerican.com/article/heres-how-climate-change-will-stress-your-homeland/
[3] https://www.un.org/en/climatechange/net-zero-coalition
[4] smithsonianmag/un-confirms-hottest-temperature-ever-recorded-in-the-arctic-in-2020
[5] https://www.ncei.noaa.gov/news/global-climate-202107
[6] https://www.energystar.gov/buildings/benchmark
Contributing Writer: Subject Matter Expert Charles McCain
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