As of the first quarter of 2024, the global green economy has achieved a market capitalisation of $7.2trn, making it the second-best performing global industry of the past decade.
The analysis from London Stock Exchange Group’s (LSEG) details green economy growth following a heavy slump in 2022. Following on from this, the global green economy’s market share dropped slightly from 8.9 per cent at the end of 2023 to 8.6 per cent in the first quarter of 2024, but the sector is forecast significant growth of 13.8 per cent over the next decade.
If listed as an independent sector, the green economy would have generated an annual revenue pool of almost $5trn in 2023, according to LSEG’s report. This would have made it the fourth largest global sector ahead of banks, retail, and energy, defeated only by healthcare, industrials and the prosperous technology industry.
In terms of investment, energy efficiency is leading the green economy while renewable and alternative energy is underperforming. Overall, the performance of green companies has been strong. Since its inception in 2008, the FTSE Environmental Opportunities All Share Index (FOAS) has outperformed its benchmark by 82 per cent to the end of March 2024. Again, the digital and green technology sectors are significant drivers of this.
Within the green economy, energy management and efficiency has been the largest and best-performing sector with 17 per cent compound annual growth rate (CAGR) over the past five years. Energy management and efficiency now accounts for 46 per cent of the green economy in listed equities, and 30 per cent of proceeds from green bonds.
The green technology sector is a substantial contributor to the sector’s growth, adding $2.3trn to the green economy’s overall market cap. Renewable energy and electric vehicle technologies are leading this drive despite supply-chain and regulatory barriers hindering the sector at times.
However, a drive towards net zero is inspiring a global clean energy transition as an increasing number of governments seek alternatives to emissions-heavy fossil fuel energy sources. As detailed by the International Energy Agency, worldwide clean energy investment surpassed $3trn in 2024.
In terms of what’s anticipated to stimulate significant future growth in the green economy, sights are set on a number of digital technologies including artificial intelligence (AI) and data centres. AI is increasingly being used as a tool to design climate solutions, although experts have raised increasing concerns over the energy and water consumption that fuels the data centres AI is dependent upon.
Renewable energy growth will have far broader application that servicing typical household and business energy needs. LSEG’s report spotlights the digital technologies sector as a “critical enabler” of the green economy as well as a potential climate risk.
Rolling out renewable energy projects to power the data centres that will be used to drive digital technologies enabling the green economy is a significant opportunity for the sustainability sector. This feeds into an array of energy efficiency opportunities also, as digital technologies rely on cooling systems, energy management, and rare-earth metals to develop and function.
The LSGE report’s key takeaway is that the green economy is a prosperous and expanding sector, but managing its collaboration with the digital technology industry which is expanding at astronomical rates is essential for sustainable future growth.
21 November 2024
19 November 2024
