The residential building sector is responsible for 20% of U.S. greenhouse gas emissions and is increasingly the focus of new, climate-protective regulations.[1] Home customers, too, are demanding more affordable energy efficient homes. PulteGroup, a leading residential construction company operating across 26 states, has not disclosed a comprehensive strategy to address these trends or to meet the Paris Agreement’s greenhouse gas goals.

Climate-protective building regulations are increasing at the municipal and state levels. To date, municipal or state-wide policies that limit the use of fossil fuels in buildings have been adopted in eight states in which PulteGroup operates.[2] Notably, five of those states are in PulteGroup’s western segment which generated 20% of the Company’s 2023 home sales revenue.[3] Governments are also passing legislation to incentivize the adoption of low-carbon building technologies such as heat pumps and rooftop solar panels. The Inflation Reduction Act offers $8.8 billion in rebates for investments in home energy efficiency, electrification, and low-carbon appliances.[4]

While PulteGroup has set a modest goal that all its new homes be capable of the ENERGY STAR 3.1 certification starting in 2025, it has not set Paris-aligned goals.[5] The ENERGY STAR 3.1 certification is a relatively weak energy efficiency standard that PulteGroup’s average home has already exceeded and is insufficient to meet many climate-related municipal and state regulations.[6] For example, California required all new residential buildings to be net zero ready by 2020 and most Massachusetts municipalities require residential buildings to reach a far greater energy efficiency than ENERGY STAR 3.1 certified homes.[7]

PulteGroup’s peers Thrive Home Builders and Unity Homes offer net-zero ready homes at scale and have significantly better average energy efficiency performance.[8] As another indication that PulteGroup lags its peers, Meritage Homes began selling 100% ENERGY STAR homes in 2009.[9] PulteGroup’s comparatively weak energy efficiency performance puts it at a competitive disadvantage as customers increasingly seek more affordable homes.

By adopting Paris-aligned emission reduction goals and developing a comprehensive, forward-looking climate transition plan, PulteGroup can remain competitive, mitigate regulatory risk, and provide investors with confidence that the Company is prepared to thrive in a low-carbon economy.