Publicly Traded Homebuilders Make Creeping Progress on Sustainability

America’s 10 largest publicly traded
homebuilders have started to improve their policies and practices relating
to the environment and resources, but much progress remains to be achieved,
according to a new study by green investment firm Calvert.

KB Home (NYSE: KBH) and Pulte (NYSE: PHM) were
ranked as the top industry firms.

Improvement from Calvert’s earlier 2008
“green homebuilder” report was noted for Meritage Homes (NYSE: MTH), Toll Brothers (NYSE: TOL), and
Standard Pacific (NYSE: SPF), while DR Horton (NYSE: DHI) and Ryland Group (NYSE: RYL) lost ground.

Titled “A Green Recovery for America’s Homebuilders? A Survey of Sustainable
Practices by the Homebuilding Industry,” Calvert’s 2010 survey of major
homebuilder sustainability notes: “Out of 42 [possible] points, the average
total score was just over six points, or 15%.

While all 10
homebuilders have made some effort to develop environmental policies or
practices, or to offer environmental products, there is strong
differentiation in the level of commitment to sustainability and the
penetration of ‘green’ homes in each company’s product mix.

Without leading
companies KB Home and Pulte Homes, the overall analytical performance of the
industry in our study would have been far worse–scoring an average of less
than 6% against key green data points.”

The top 10 homebuilders were ranked as follows for 2010:

1. KB Home, Los
   Angeles (#1 in 2008)
2. Pulte Homes, Bloomfield Hills, MI (tied for #2 in
   2008)
3. Meritage Homes, Scottsdale, AZ (#8 in 2008)
4. Toll Brothers,
   Horsham, PA (#9 in 2008)
5. Lennar (NYSE: LEN), Miami, FL (#5 in 2008)
6. DR Horton,
   Fort Worth, TX (tied for #2 in 2008)
7. Standard Pacific, Irvine, CA (tied
   for #11 in 2008)
8. NVR (NYSE: NVR), Reston, VA. (last at #13 in 2008)
9. Ryland
   Group, Calabasas, CA (#6 in 2008)
10. MDC Holdings (NYSE: MDC) Denver, CO (tied for
    #11 in 2008)

Green building represents a major opportunity to the industry as it focuses
on rebuilding its market and restoring financial profitability. Estimated at
$36-49 billion, the green building market is expected to increase twofold
between 2009 and 2013.

Homes account for about 21% of U.S.
energy-related carbon dioxide (CO2) emissions, a figure which places
considerable responsibility on homebuilders to manage their contribution to
climate change by addressing, among other things, the energy efficiency of
their products.

“Our survey of the 10 largest publicly traded U.S. homebuilders finds an
evolving landscape. Whereas two years ago the industry had not yet begun to
embrace sustainability as a core part of building design and construction,
companies today have taken many meaningful steps toward developing greener
and cleaner homes,” said Rebecca Henson, Sustainability Analyst at Calvert
Asset Management Co., Inc. and co-author of the report. “Much of this
progress may be attributable to companies’ recognition of the environmental,
societal, and economic benefits of green building, as well as the critical
roles that engaged stakeholders have diligently played over the past decade.
However, given the environmental impact that homebuilding has, the industry
has significantly more progress to make.” 

Other Key Findings:

• Homebuilders are not measuring and disclosing their impact on the
  environment in a comprehensive manner. Calvert’s analysis looked for
  environmental performance data points that homebuilders use to measure and
  manage their footprint, but nearly all homebuilders had no relevant data.
• Whereas Calvert’s last report showed a preference towards regional
  policies and programs, homebuilders are now making company-wide, national
  sustainability commitments that pledge full product participation in energy,
  water, and climate change initiatives. At this point, KB Home is the only
  large U.S. homebuilder to produce a comprehensive sustainability report.
• Companies are most active in energy efficiency and conservation compared
  with other environmental issues. Every homebuilder reviewed for this
  analysis had some level of policy or program focused on curbing residential
  energy use. The analysis shows that KB Home, Meritage Homes, and NVR
  (through its subsidiaries) have national commitments to build all new homes
  to EnergyStar standards.
• The 10 companies pay more attention to sustainability issues that can
  offer nearer-term financial benefits to operating costs and customers, such
  as building material recycling and energy and water efficiency measures.
  Issues with longer-term benefits, such as climate change, are not well
  addressed by this industry.
• In light of SEC interpretive guidance on climate change in early 2010,
  some homebuilders are choosing to disclose risks related to climate change
  through their annual 10-K filings. At this point, homebuilders appear most
  concerned about the effect of carbon regulation on costs, rather than direct
  physical impacts of a changing climate.
• Climate change may cause vulnerability to the homebuilding industry due to
  uncertainty of raw materials supply and land development characteristics,
  among other impacts. At the same time, the industry, whose products are
  responsible for over one-fifth of energy-related greenhouse gasses (GHGs),
  must prepare for future carbon regulation by the EPA. Finally, the industry
  must also address its use of timber as forests play a crucial role in both
  the cause and mitigation of climate change.
• Homebuilders have a long way to
  go with regard to climate change. The research shows that
  seven of the 10 homebuilders did not report any significant information on
  its climate impact or the risks or opportunities that climate change may
  pose to the company. Pulte Homes and KB Home, responders to the Carbon
  Disclosure Project (CDP), are the only companies that currently report their
  levels of greenhouse gas emissions, although both companies are at early
  stages of capturing and
  disclosing this information. 

The full report is available at the link below (pdf).