Geeta Aiyer

The energy crisis of the 1970s precipitated a transformation in the auto industry: large gas guzzlers were replaced by small, efficient cars. Fuel efficiency in miles per gallon rose sharply, reducing demand for expensive gasoline, thereby lowering dependence on imported oil. Yet as oil prices rise the discussion today has focused primarily on how to solve the supply problem in energy, i.e., how to produce MORE oil, natural gas, coal, and even renewables. No talk yet about how to use LESS, how to cut energy waste, increase efficiency, redesign for energy productivity, and embrace demand reduction – the other energy solution critical to energy independence.

The statistics on energy waste are staggering. In 2015, I spoke on Energy Day at COP21 in Paris, quoting from Professor Mara Prentiss’s new book, The Energy Revolution: Of the 100 quadrillion BTUs of energy we use in the US, we waste 61 quadrillion, meaning less than 50% of energy consumed performs useful work! In a gasoline-powered car driven in the city, only 16% of energy consumption actually goes toward moving the wheels.[1] Of every six gallons of gasoline burned, only one gallon moves the car. Highway-use only modestly improves this number to one in four.

This is waste by design rather than wasteful behavior. Since we rely on burning fuel to create mechanical energy, using heat engines like fossil-fuel burning electric power plants and gasoline powered cars wastes heat energy. And this colossal waste has only worsened – 2019 data shows only 32% of energy is used and 68% wasted.

A Sankey Diagram of U.S. Energy Consumption in 2019. The Lawrence Livermore National Laboratory has produced this visualization based primary data sources from the DOE and EIA.

But solutions are at hand. Electric cars, for example, ensure that most of the energy drawn upon is used for motion even after transmission losses. Replacing gas boilers with heat pumps and electric water heaters is another plus. Amory Lovins addressed the question in his Fall 2018 piece, How big is the energy efficiency resource? Answer – it’s huge. Integrated design has potential for dramatic energy savings from industry, transport, and buildings. Many other benefits would follow. Almost 50% of our transition to a low-carbon future can come from reduced waste and better models for a shared and circular economy. Renewable energy can more easily power our total needs if demand becomes half of what it is today.

Sustainable investors can finance a post-Ukraine economy by providing patient capital paired with an impatient voice for change. Hundreds of Net-zero carbon commitments, big and small, have been made, but those plans often have multi-decade timelines. Recent events have once again shown that depending on countries with repressive regimes lacking internal accountability poses a high risk to investors and citizens alike. There is now a geopolitically driven urgency to pivot immediately — to cut energy demand in pursuit of energy independence.

Demand reduction, the other energy solution, will disrupt current practices, unleashing design, technology, and organizational creativity. The leaders who emerge will be the “small cars” of this era, gaining market share, consumer loyalty, and global first-mover advantages.

Reducing Energy Demand: Investing and Advocating for The Other Energy Solution

Energy Efficiency

Steven Heim, Director of ESG Research

Investment strategy – Since 2007, we have invested in companies selling industrial, commercial, and residential energy efficiency solutions:

  • Spirax Sarco – UK steam engineering
  • SAP – enterprise resource planning software
  • Schneider Electric – digital architecture for building management
  • TopBuild – building insulation
  • Atlas Copco – energy efficient compressors

Engagement strategy – Launched in 2015, our Eco Efficiency-initiative prioritizes demand reduction through:

  • Improving productivity & efficiency to reduce energy demand
  • Reducing water use
  • Using circular economy principles to eliminate waste

Our 2019 report details best practices and framework for removing internal barriers to efficiency investments – the key to changing corporate behavior.

Our Research

Willow Huppert, ESG Research Associate

Circular Economy: Circular economy solutions provide significant opportunities to enhance efficiency. Companies using recycled inputs can reduce the carbon footprints of products, address waste reduction, and enable customers and investors to meet climate goals. Boston Common invested in several Industrials names that use recycled inputs and seeks companies that are actively working to grow the recycled content of their products and build the infrastructure necessary for a circular economy.

Shared Economy: Business models built on rented short-term use are more efficient by social design. For example, United Rentals rents out expensive industrial equipment and machinery that can be used by large and small companies rather than leaving equipment idle or tying up capital.

Our Engagement:

Initial Purchase: We integrate Eco-Efficiency asks into our initial purchase engagement approach.

High Emitter Engagement: As part of our commitment to the Net Zero Asset Managers Initiative (NZAMi), in 2021 Boston Common launched the High Emitter Initiative to reduce financed emissions in our portfolios and accelerate ESG Momentum among our largest carbon emitters. We encouraged holdings to adopt robust, time-bound, interim science-based targets (2030), and implement climate actions plans to support appropriate decarbonization pathways. We promote our value chain approach to climate action, encouraging companies to align their efforts with their partnerships, supplier relationships, and political activity.

[1] Prentiss, Mara. Energy Revolution: The Physics and the Promise of Efficient Technology. The Belknap Press of Harvard University Press, 2015.

The information in this document should not be considered a recommendation to buy or sell any security. There is no assurance that any securities discussed in this report will remain in an account’s portfolio at the time you receive this document. The securities discussed do not represent an account’s entire portfolio and may represent only a small portion of an account’s holdings. It should not be assumed that any securities transactions we discuss were or will prove to be profitable.

Published On: April 6, 2022Categories: In the News