December 16, 2020

Investing in the green economy - Sizing the opportunity

The green economy is an increasingly important part of addressing environmental objectives and its data, a key part of investors sustainable investment tool kit. With the development of new green taxonomies at the national level, broad, granular datasets are going to be important in their implementation.

The FTSE Russell Green Revenues 2.0 (“GR 2.0”) Data Model provides investors with a data on more than 3,000 global listed companies that have exposure to the green economy. It addresses important challenges of green economy data; the taxonomy of green activities, tiers of "greenness" and low levels of disclosure of green revenues.

In this paper we thoroughly explore the US$4 trillion market cap green economy investment opportunity:

  • The data shows the green economy is represented by more than 3,000 global listed companies, a US$4 trillion market cap opportunity‒an equivalent of over 5% of the total listed equity market.
  • The green economy has grown faster than the overall equity market. This growth will need to accelerate if the world is to meet the investment levels outlined to achieve the objective of keeping global warming within 2 degrees.
  • The green economy is both diversified by company size and geography, although certain areas such as Europe and Japan are more exposed. From an industry perspective, almost two thirds of the green economy come from utilities, technology and industrial goods and services.
  • Within the GR 2.0 data, energy management & efficiency represents a third of the green economy, providing solutions to multiple environmental issues. Renewable energy is one of the highest profile areas of the green economy, but other areas such as water, pollution control or sustainable food and agriculture are less discussed, but also very important.
  • In the rapidly evolving world of green products and services, we expect the market to continue to grow, and new activities develop. The GR 2.0 data set will help investors analyse the opportunity, their exposure to it and look for potential winners and losers.