Over the past decade, companies focused on carbon-reducing products and services would have ranked as the second-best performing industry, just behind the tech sector, with a 198% total return, according to a London Stock Exchange Group (LSEG) report.
The biggest contributor to the green sector’s outperformance is energy management and efficiency, with a 17% compound annual growth rate over the last five years.
Efficient information-technology equipment and electronics has now overtaken green building supplies as one of the top drivers of growth, according to Lily Dai, senior research lead in LSEG’s sustainable investment research team.
This is a one-of-a-kind investment opportunity. That’s both in terms of “size and performance.
Jaakko Kooroshy, global head of sustainable investment research LSEG
The transition to low-carbon energy, costing over $100 trillion, presents significant investment opportunities. Despite the current focus on AI-driven tech growth, the green transition remains a formidable long-term investment force, says Jaakko Kooroshy, LSEG’s global head of sustainable investment research.
LSEG’s green economy definition includes over 4,000 companies globally, with a $7.2 trillion market capitalization and a 14% annual growth rate, making up 8.6% of global equity markets.
The FTSE Russell Environmental Opportunities All Share Index, featuring companies like Microsoft, Taiwan Semiconductor, and Tesla, has outperformed the FTSE Global All Cap by 82% since 2008. AI and data centers may further boost the green economy by requiring more energy-efficient technologies and clean energy sourcing.
Challenges like overcapacity in solar sectors and trade barriers in renewable energy and EV manufacturing could slow growth. Protectionist policies, while providing demand and subsidies, risk complicating trade and slowing the deployment of low-carbon technologies, warns Kooroshy.
Source: Bloomberg, Article by Alastair Marsh, Journalist at Bloomberg News and with insightful analysis from Jaakko Kooroshy, Global Head of Sustainable Investment Research of the LSEG (London Stock Exchange Group).
