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Greener Pastures for America's Home Builders
June 2008
Despite some encouraging environmental and energy-efficiency developments in recent years, none of America’s 13 largest publicly traded home builders has “fully embraced the emerging market of sustainable building design and construction,” according to a major new study by Calvert, with support from the Boston College Center's Institute for Responsible Investment.
Entitled Greener Pastures for America’s Home Builders? A Survey of Sustainable Practices by the Homebuilding Industry, the report concludes: “Our survey of the 13 largest publicly traded U.S. home builders finds that, while every major home builder has incorporated some environmental and efficiency programs and products into some of their new homes, none has fully embraced the emerging market of sustainable building design and construction. Calvert’s study of the sustainable policies, programs, and performance of the nation’s largest home builders revealed that the industry has a long way to go before any of the companies can truly claim to be addressing the risks and opportunities inherent in the environmental and climate change dilemmas.”
Commenting on the report, Stu Dalheim, Director, Shareholder Advocacy, Calvert Group, said: “This is a real and growing issue for homebuyers and for investors. As consumers become more educated about environmental options and green residential construction, and as regulators increase incentives for green development and restrict conventional development efforts, some home builders may be at a competitive disadvantage if they have not integrated sustainable design and construction principles into their construction. In the green building market there is a first-mover advantage: Companies that make a concerted national effort to integrate sustainability into project sites, construction materials, and construction processes, as well as to provide energy, water, and habitat conservation options in finished products, will be able to build a brand image as the environmental choice for home construction. This brand will help environmentally conscious consumers make their selection of a home builder.”
David Wood, Director, Boston College Institute for Responsible Investment, said: “Calvert’s efforts to identify and benchmark best practices in sustainable homebuilding are a leading indicator of how sustainability is likely to be integrated into investment analysis of the homebuilding sector in coming years.”
Other Key Findings
- Many of the companies had strong regional programs for environmental responsibility. However, while some of these programs have had significant results (Pulte and KB each has built over 15,000 Energy Star homes), the major builders offer few of these environmental options nationwide.
- Many publicly traded home builders have committed to ambitious goals in energy efficiency, suggesting that major home builders’ attitudes toward green building might be changing. In fact, 12 of the 13 largest home builders have now committed to building 100% Energy Star homes in certain markets. However, as of the publication of this report, no major home builder has publicly committed to environmental responsibility as a core business strategy.
- NVR Inc., Standard Pacific, MDC Holdings, and K. Hovnanian—the lowest-ranked builders—“make virtually no mention of the environment on their Web sites or in other reports and have few programs to mitigate their environmental impacts. Not surprisingly, they lag behind the rest of the field in developing green homes. They are not very involved in the Building America program, are near the bottom in Energy Star, and have not been engaged in other green building efforts. These companies may score lower because they are simply not public with their environmental goals or neglect to report their environmental successes.”
The survey of the 13 largest publicly traded U.S. home builders used four major “green” indicators: energy use; building-material use; water use; and land use.
As an investor, Calvert seeks to discern how major U.S. home builders compare on policies, programs, and performance relating to the environment and resource efficiency. Despite the slump in the overall housing market, the green building industry is seeing annual growth of as much as 30 percent.
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