Green Economy Hits $10 Trillion in Market Value
by Ajani Stella
The group of companies that derive significant revenue from environmental solutions, known as the green economy, has topped $10 trillion in market value, a new report found.
That milestone was tied to a 5.3 percent growth in green revenue last year, according to the London Stock Exchange Group’s report, released Wednesday. Green companies—those with at least one-fifth of their revenue coming from environmentally focused activities—outperformed the broader market by around 12 percent over the past decade.
The report demonstrates green businesses’ resilience in the face of political and social pushback, particularly as major economies such as the United States retreat from climate investment.
Gernot Wagner, a climate economist at the Columbia Business School who independently reviewed the report, said market capitalization, or a company’s total value, is “what makes the world go round” by demonstrating profitability to investors.
“Market capitalization, if and when measured properly, is a sign that there are investors who have $10 trillion of capital sitting in the clean, green, low-carbon economy, expecting market returns—sizable returns, reasonable returns, average returns—and that’s a big deal,” Wagner said.
LSEG said the findings reflect the green economy’s strong performance despite global volatility, energy shocks and uncertainty. But Wagner said it has grown because of those issues, not in spite of them, demonstrating its “reliability and resiliency.”
“The green economy has surpassed $10 trillion because of fossil energy shocks, policy divergence and market volatility, and because of that we also see greater returns on the investments that make more sense in the current policy environment, energy shock environment, than the fossil investment,” Wagner said.
Wagner, the Columbia climate economist, said LSEG’s report is distinct from BloombergNEF’s because it underscores “how much money is actually sitting in those companies expecting returns,” which is attractive to future investors.
Wagner said the LSEG report is a positive signal for strategic investors interested in companies’ long-term viability.
“Those $10 trillion sitting in green economy market capitalization—those are what I would call ‘value investments,’” Wagner said. “They might already make a slightly higher return today; they really pay off in the long run, which, by the way, isn’t that far.”
He added: “While players might change, the overall demand trends are, I would say, pretty clear, pointing in one and only one direction—and that direction is up.”
