Green economy ranks second best performing industry globally in past decade

The US leads the green economy market, followed by Taiwan and China.

This is according to London Stock Exchange Group (LSEG)’s ‘Investing in the Green Economy’ report, which provides insights based on a detailed assessment of more than 19,000 companies, using revenue data from 133 products and services defined by the FTSE Russell Green Revenue Classification System.The green economy spans diverse industries and global value chains, with contributions from more than 50 developed and emerging markets.

According to the report, the green economy has been the second-best performing industry since its inception in 2008, trailing only the technology sector, with a market capitalisation of $7.2trn in the first half of 2024.

Over the past decade, the green economy’s long-term growth has outpaced the broader equities market, with a compound annual growth rate (CAGR) of 13.8%.

The report highlights that since 2020, the green economy market has experienced volatility due to supply chain disruptions, cost inflation, higher interest rates and geopolitical fragmentation. Despite these challenges, the green economy is expanding, having rebounded strongly last year.

According to the report, the technology sector is the largest within the green economy, with a market capitalisation of $2.3trn, while the automobiles sector has the highest green penetration rate at 42%. The US leads the green economy market, followed by Taiwan and China.

Sector-based performance

Performance varies across different green industries. Energy efficiency remains the top performer, representing 46% of the market and 30% of green bond proceeds, and includes sectors like efficient IT equipment and green buildings. Conversely, renewable energy underperformed in 2023 due to high interest rates, cost inflation, and overcapacity leading to collapsing prices.

The growth of digital technologies, especially artificial intelligence (AI) and data centres, is fuelling further expansion in the green economy. Major tech companies are increasingly investing in renewable energy to address their energy consumption and environmental impact.

For example, Microsoft has invested $10bn into clean energy power purchase agreements for 10.5 gigawatts (GW) of solar and wind energy. However, there have been concerns over the rise in carbon emissions from major tech companies due to AI expansion and the need to make the industry less carbon-intensive.

Moreover, the report highlights that in the fixed income asset class, the green bonds market has shown resilience, with $540bn issued in 2023 despite high interest rates.

While issuance was lower than the peak in 2021, it rebounded from 2022 levels. Newly issued green bonds now constitute approximately 6% of annual bond offerings, though outstanding green bonds represent only 2% of the bond market.

Iberdrola’s €750m green bond

Iberdrola has issued €750m worth of green bonds over the past decade, attracting strong international demand exceeding €4bn.

Investors include a leading contingent from France at 36%, followed by Germany at 16%, the Benelux countries at 15%, the UK at 17%, and other European nations at 16%.

Additionally, a majority of the transaction (85%) was placed among environmental, social and governance (ESG) investors.

Ten banks participated in the placement, including BBVA, Bank of America, HSBC, Kutxabank Investment Norbolsa, Mizuho, Natixis, Standard Chartered, Unicredit and Wells Fargo.

The funds from this transaction will be used to finance green projects that meet the eligibility criteria established by Iberdrola’s Framework for Green Financing.

The company has plans to invest €41bn between 2024 and 2026 in networks, renewables and storage to boost the electrification of the economy.


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