Environmental, social and governance, or ESG, investing has become more popular on Wall Street as stock market investors grow more concerned about how a company’s sustainability will ultimately affect its bottom line.
Not to be left out, the real estate industry is also becoming more sustainable, including real estate investment trusts, or REITs. These companies own, operate or finance income-producing real estate, such as apartment complexes, medical facilities and warehouses.
“Public reporting of ESG has become the new normal in the REIT industry,” according to the National Association of Real Estate Investment Trusts, or Nareit.
All of the biggest 100 U.S. equity REITs by equity market cap reported ESG efforts publicly in 2021, up from 60 in 2017, according to Nareit. More than 80 of those REITs owned certified-green buildings in 2021.
These nine REITs are known for their ESG efforts and their environmental credentials:
— Hannon Armstrong Sustainable Infrastructure Capital Inc. (ticker: HASI)
— Americold Realty Trust Inc. (COLD)
— Prologis Inc. (PLD)
— Equinix Inc. (EQIX)
— Welltower Inc. (WELL)
— Host Hotels & Resorts Inc. (HST)
— Equity Residential Properties Trust (EQR)
— AvalonBay Communities Inc. (AVB)
— Extra Space Storage Inc. (EXR)
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Hannon Armstrong Sustainable Infrastructure Capital Inc. (HASI)
This REIT says it is the first U.S. public company solely focused on climate solution investments. It provides capital to companies involved in energy efficiency, renewable energy and other sustainable infrastructure markets.
As of Sept. 30, 57% of Hannon Armstrong’s $3.9 billion portfolio was in energy efficiency, distributed solar and storage markets, while 41% was in grid-connected wind, solar and storage.
“Hannon Armstrong Sustainable Infrastructure is always near the top of our — and many others’ — list of sustainable REITs,” says Samuel Adams, CEO of Vert Asset Management and portfolio manager of the Vert Global Sustainable Real Estate Fund (VGSRX). “They are in the business of transitioning buildings and infrastructure away from fossil fuels and toward renewables.”
Dividend yield: 4.2%
Americold Realty Trust Inc. (COLD)
This REIT focuses on the ownership, operation, development and acquisition of temperature-controlled warehouses.
Its warehouse segment collects rent and storage fees from customers to store frozen and perishable food within the firm’s real estate portfolio. Another segment manages warehouses for third parties. The company’s transportation segment brokers and manages transportation of frozen and perishable food and other products.
“Refrigerating large warehouses requires enormous amounts of energy; so Americold is rightly focused on insulation, efficiency and prioritizing renewables,” Adams says. “Their overall corporate mission of reducing food waste is environmentally friendly as well.”
Dividend yield: 2.9%
Prologis Inc. (PLD)
This logistics REIT is the No. 3 holding in the Vert Global Sustainable Real Estate Fund.
It owns warehouses around the world and rents them to customers like Amazon.com Inc. (AMZN), FedEx Corp. (FDX) and Walmart Inc. (WMT), allowing them to receive, store and deliver goods more efficiently, according to a Vert profile of Prologis.
According to PLD’s 2021-2022 ESG report, the company is aiming for net-zero emissions across its value chain by 2040 and from its own operations by 2030.
To enable customer decarbonization efforts, it plans to deploy 1 gigawatt of solar energy supported by battery storage by 2025.
Dividend yield: 2.5%
[SEE: 7 of the Best Long-Term Stocks to Buy.]
Equinix Inc. (EQIX)
This data-center REIT provides space for the computers that make our modern digital life possible. Its fiscal year 2021 sustainability report says it aims to be climate neutral globally by 2030.
For the fourth year in a row, more than 90% of the electricity the company used came from renewable sources.
It’s the No. 2 holding in VGSRX. “We expect REITs who are committed to sustainability to be more profitable and less risky in the long run than REITs who aren’t going green,” Adams says.
Dividend yield: 1.7%
Welltower Inc. (WELL)
This health care REIT provides capital to senior-housing operators, post-acute-care providers and health systems.
Its 2021 ESG report noted that it received 26 green building certifications during the year, bringing its total to 94 as of the end of 2021.
It aims to reduce its greenhouse gas emissions and energy and water usage intensity by 10% by 2025, compared with 2018 numbers.
As of the 2021 report, it has brought its scope 1 and 2 greenhouse gas emissions down by 5.9%. “REITs with advanced sustainability and ESG programs are better set up for the challenges of today and tomorrow,” says Adams.
Dividend yield: 3.2%
Host Hotels & Resorts Inc. (HST)
REITs with ESG programs have some advantages over their peers that are less advanced on the ESG spectrum, Adams says.
“They use less energy and water, thus saving money and reducing the risk of supply problems,” he says. “Their employees are happier and stay longer, so labor shortages don’t bite so hard. And they have greener, cleaner and healthier buildings — which is less of a luxury and more of a ‘must have’ now, since COVID.”
Host Hotels & Resorts is a hospitality-focused REIT that uses green building technologies and practices that lower costs. All of its properties use LED lighting and water-efficient technologies.
Dividend yield: 2.6%
Equity Residential Properties Trust (EQR)
This housing REIT invests in rental apartments, with holdings in top markets such as New York, San Francisco, Boston and the District of Columbia.
The company installs energy-efficient appliances and fixtures when it renovates properties.
Equity Residential aims to reduce scope 1, 2 and 3 greenhouse gas emissions intensity per square foot by 30% by 2030, from a 2018 baseline. So far it’s brought that intensity down by 7.7%, according to its 2022 ESG report.
But it has some catching up to do with its portfolio-wide water consumption intensity per square foot. The company’s goal is to reduce that by 20% by 2030 from a 2018 level. But it’s seen a 0.5% increase since then.
Dividend yield: 3.8%
AvalonBay Communities Inc. (AVB)
AvalonBay is another apartment-focused REIT. In 2021, the company issued its first green bonds for a combined issuance of $1.1 billion.
Those bonds are designed to raise money for environmentally friendly projects. The company has decreased its scope 1 and 2 emissions by more than 31% from a 2017 baseline and its scope 3 emissions by more than 23%, according to its 2021 ESG report.
During that year the company activated 23 additional solar panel systems and increased its green electricity procurement to provide more than 90% of its common area electrical load.
Dividend yield: 3.6%
Extra Space Storage Inc. (EXR)
This REIT says it is the second-biggest operator of self-storage facilities in the U.S. It operates in 41 states and the District of Columbia, with more than 152 million square feet of rentable space.
The company has completed lighting retrofits at more than 350 of its wholly owned stores in 27 states, saving the same amount of CO2 as removing 15,000 cars from the roads, its website says.
Half of its REIT-owned locations operate with solar panels, and the company has hundreds more installation projects in the planning, development and building phases.
Dividend yield: 3.7%
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9 Green REITs for Sustainable Investing originally appeared on usnews.com
Update 02/16/23: This story was previously published at an earlier date and has been updated with new information.
