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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.

Top 10 Homebuilders 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.

Rebecca Henson, Sustainability Analyst at Calvert Asset Management and co-author of the report, said:

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.

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.

Disclosure: No positions

Source: Publicly Traded Homebuilders Make Creeping Progress on Sustainability