Energy management is largest sector, representing one third of total green economy.
The green economy makes up 5% of the global equity market, valued at US$4 trillion, according to recent research by FTSE Russell.
The FTSE Russell Green Revenues 2.0 Data Model analysed 16,000 companies, out of which 2,951 were found to generate revenues from their green products and services, the equivalent of 19% of the total market capitalisation.
However, as many generate only a small percentage of revenues from green products and services, the report utilised a “Green Revenue-weighted market cap”, which altered the green economy’s total market cap to 5.4% (US$4.3 trillion).
FTSE Russell’s investible green universe is diverse across both company size and geography, with Europe and Japan most represented. Almost two–thirds of the green economy centres around utilities, technology and industrial goods and services.
Energy management represented the largest sector, contributing to 33% of the total green economy. Energy generation and energy equipment represented 14% and 9% respectively.
According to the report, the green economy has grown faster than the overall equity market, with a growth rate of 8% per annum, and is estimated to have overtaken the oil and gas sector.
But to achieve the global climate objectives, the report suggests that this growth will need to further accelerate. According to FTSE Russell estimates, to hit US$90 trillion in green investments by the end of 2030, an additional US$6 trillion per annum will have to be generated.
The index and data provider described the process of measuring the size of the green economy as “challenging”, particularly due to lack of consistent, granular data and of numerous taxonomies in different parts of the world.
The report lauded the EU taxonomy as the “most advanced” to date, but warned the development of other classification frameworks by the UK, China, Japan and Malaysia could increase the difficulty of measuring the size of the green economy.