Green economy firms have seen total market returns of 198% over the past decade, making the sector the second-best performing equity segment over the past decade, behind technology, Bloomberg reported on Tuesday, citing a report from London Stock Exchange Group Plc (LSEG).
LSEG has defined the “green economy” as including companies generating revenues from renewables and mining and processing of critical minerals and has estimated that this green industry overall now has a total market capitalization of $7.2 trillion. The green economy has seen a 14% compound annual growth rate (CAGR) over the past ten years, LSEG’s report showed.
In its analysis, LSEG has used the FTSE Russell Environmental Opportunities All Share Index as a benchmark for the green economy sector. This index has outperformed the FTSE Global All Cap by 82% since 2008, LSEG said in the report carried by Bloomberg.
Renewable energy has been a laggard in the green economy performance, but the energy transition is a “mega force” that should be taken into account in the coming years, according to LSEG.
Over the past decade, the top performers of the green economy have been companies primarily working in energy efficiency and management, the report notes.
Despite a generally rosy outlook of the green economy, there are headwinds to sustained growth in equity performance and the pace of the energy transition. These include trade tariffs that could slow the rollout of clean energy technologies, Jaakko Kooroshy, global head of sustainable investment research at LSEG, told Bloomberg in an interview.
U.S. and EU incentives for domestic green energy manufacturing are set to boost growth, but the tariffs on China’s EVs could undermine clean energy goals and lead to widening trade spats.
Just last week, China said it was proceeding with anti-dumping investigations of EU imports, targeting brandy and pork imports from the bloc, as the tariff spat entered a new phase with the start of the provisional EU tariffs on imports of China-made electric vehicles.
By Tsvetana Paraskova for Oilprice.com
