The modern concept of socially responsible investing dates back to the 1960s when social justice advocates and the media began bringing ethical considerations to the attention of the investing public. Many investors, and some asset managers, began to question investing in things like tobacco, weapons manufacturing and polluting industries.
The Kyoto Protocol — signed in 1997 and implemented in 2005 — was a turning point for socially responsible investing, especially in energy sustainability. That landmark global agreement further heightened public awareness of big corporations’ sometimes detrimental environmental impacts. Many public companies began regularly publishing corporate social responsibility reports that detail efforts to align operations with sustainability targets.
Since Kyoto, many federal, municipal and local governments have steadily tightened environmental and social regulations and made sustainability a key component of corporate governance. Today, environmental, social and governance (ESG) and sustainable investing have become significant trends on Wall Street.
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According to the International Energy Agency, as much as 30% of global energy is consumed by buildings. That makes sustainability an especially important issue in the commercial real estate industry.
Real estate investment trusts, or REITs, that own and operate buildings are highly incentivized to make buildings more energy efficient. In addition to being better for the environment, greener and more sustainable, these buildings have lower operating costs and generate higher net operating income. They also have higher property values when it comes time to sell.
If you’re a REIT investor who is concerned about the environmental impact of the stocks you own, here’s a list of seven real estate companies that have demonstrated real leadership in adopting sustainable business practices that align with ESG goals:
| REIT | Forward Dividend Yield* |
| Alexandria Real Estate Equities Inc. (ticker: ARE) | 4.9% |
| BXP Inc. (BXP) | 4.9% |
| Digital Realty Trust Inc. (DLR) | 2.5% |
| HA Sustainable Infrastructure Capital Inc. (HASI) | 5.3% |
| Prologis Inc. (PLD) | 3.3% |
| Host Hotels & Resorts Inc. (HST) | 4.2% |
| JBG Smith Properties (JBGS) | 4.3% |
As of Dec. 6.
Alexandria Real Estate Equities Inc. (ARE)
ARE is a REIT with a market cap of about $18 billion. The company specializes in life science properties — medical and biotechnology labs where research firms conduct critically important scientific research.
This one-of-a-kind REIT has a portfolio of about 42 million square feet of rentable laboratory space in North America. ARE has about 5.3 million more square feet of additional facilities undergoing construction.
This environmentally responsible REIT is constantly striving to lower its carbon footprint. ARE is known for using renewable energy sources such as solar panels and geothermal heating and cooling systems in all of the properties it develops. It also created a unique wastewater heat recovery process that is used in its facilities in Boston and Seattle.
Forward dividend yield: 4.9%
BXP Inc. (BXP)
In 2021, BXP demonstrated its commitment to sustainability by developing one of Massachusetts’ first net-zero, carbon-neutral building repositioning projects. The 106,000-square-foot complex — located in Needham, MA — represented the beginning of the company’s large-scale environmental responsibility initiative which continues to this day.
BXP — formally known as Boston Properties — has a market-cap of about $14 billion. It is the largest publicly traded office REIT in the U.S. The firm focuses its investment activities on large cities on the east and west coasts, mostly in Boston, New York, Los Angeles and San Francisco.
BXP is a fully integrated REIT, meaning all of its business operations are handled in-house. It has an equity interest in more than 180 properties totaling about 53 million rentable square feet of class-A office space.
Forward dividend yield: 4.9%
Digital Realty Trust Inc. (DLR)
DLR is a $64 billion REIT in the fast-growing digital infrastructure industry. The company owns and operates more than 300 data centers around the world, and its portfolio of properties is growing.
In addition to renting space to tech companies, DLR also offers software product called PlatformDIGITAL, which helps clients store, manage and instantly access data.
Data centers consume tremendous amounts of electricity energy. A lot goes toward powering the huge number of servers housed inside, but the lion’s share is used by the giant air conditioning units used to keep all that sensitive equipment cool.
To cut down on energy consumption and move toward a sustainable future, DLR created a powerful artificial intelligence platform to boost energy efficiency and dramatically lower its carbon footprint. The program is called Apollo AI. It monitors and reports on every aspect of a data center’s operation that uses energy. This innovative program can identify something as small as a dirty air filter and something as big as a malfunctioning air conditioning condenser. In short, Apollo AI makes running a data center as efficient as possible. That’s what makes DLR a leader in sustainability.
Forward dividend yield: 2.5%
[SEE: 7 Clean Energy ETFs to Buy Now]
HA Sustainable Infrastructure Capital Inc. (HASI)
HASI is a $3.7 billion REIT that invests only in securities related to renewable energy, sustainability infrastructure and energy efficiency. HASI is a hybrid REIT, meaning it owns and operates real property directly but also invests in mortgages and debt instruments related to real estate.
This Annapolis, Maryland-based company focuses on solar projects, wind farms, clean-burning natural gas facilities, fuel cell development, smart grid technology and other green real estate initiatives.
Forward dividend yield: 5.3%
Prologis Inc. (PLD)
PLD has a massive presence in the transportation and logistics real estate industry. The company boasts a market cap of about $103 billion and has interests in 1.2 billion rentable square feet of industrial space.
This company’s warehouses and transportation terminals are modern, high-tech facilities. It uses high-speed computers, digital communications, AI and cloud computing technology to help its customers efficiently fulfill orders and deliver products across the U.S. and in Canada, Mexico, the U.K., Germany, Japan and China.
PLD was an early adopter of green building certification. It consistently seeks to reach and maintain Leadership in Energy and Environmental Design (LEED) standards in all of its buildings and is committed to continuing that practice.
Forward dividend yield: 3.3%
Host Hotels & Resorts Inc. (HST)
HST has committed to implementing sustainable practices in every one of its 77 hospitality properties in the U.S., Canada and Brazil. The company controls about 42,000 hotel rooms. Whenever a property is updated, special emphasis is given to energy efficiency and natural resource conservation.
With a market capitalization of over $13 billion, HST is the largest lodging REIT in the U.S.
Wall Street is estimating HST will generate $5.6 billion in revenue for 2024 and will grow that figure by 3.5% to $5.8 billion in 2025. Wells Fargo Securities has an “overweight” rating on the stock. Stifel gives the company a “buy” rating.
Forward dividend yield: 4.2%
JBG Smith Properties (JBGS)
Thus $1.4 billion REIT controls over 14 million rentable square feet of mixed-use space in the expensive and highly competitive capital district around Washington, D.C. Its properties cover several real estate classes, including multifamily, retail and office.
Amazon.com Inc. (AMZN) expects that its new campus in Northern Virginia that will add 25,000 workers by 2038, and JBGS is positioning itself to take full advantage of that explosive growth.
The company plans to benefit the environment and appeal to Amazon’s environmentally conscious employees by promoting sustainability and green development practices in every building it buys or builds.
Forward dividend yield: 4.3%
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7 Green REITs for Sustainable Investing originally appeared on usnews.com
Update 12/06/24: This story was previously published at an earlier date and has been updated with new information.
