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$7.2 Trillion Green Economy Surges Ahead, Second Only to Tech Sector Over the Past Decade

According to recent figures from the London Stock Exchange Group, the global green economy has soared to a market capitalization of $7.2 trillion. This revelation positions green industries as the fourth largest sector by value, surpassing banks, retail, and energy and trailing only healthcare, industrial firms, and tech giants.

The report, titled Investing in the Green Economy 2024: Growing in a Fractured Landscape, unveils that companies offering climate and environmental solutions achieved a remarkable 13.8 percent compound annual growth rate over the past decade. This makes the green economy the second best-performing industry globally in the last ten years, eclipsed only by the tech sector.

By April, companies with green revenues represented 8.6 percent of global listed equity markets. The report underscores that the green economy is one of the most significant investment opportunities of the 21st century in terms of scale, growth trajectory, and financial performance.

However, the London Stock Exchange Group noted that this robust performance isn't uniformly spread across all green sectors. For instance, energy efficiency emerged as the top-performing green sector, accounting for 46 percent of the green economy and 30 percent of green bond proceeds. Conversely, renewable energy assets lagged last year.

The report also highlights several headwinds that could affect valuations in the future, such as overcapacity issues and trade barriers for renewable energy equipment and electric vehicles. Additionally, downsizing at major US green companies earlier this year caused the green economy's share of global listed equity markets to dip slightly from 8.9 percent at the end of 2023 to 8.6 percent in the first quarter.

Despite market volatility and intricate geopolitical risks, the green economy is increasingly recognized as a fundamental component of financial markets. Last year, the green bond market maintained momentum, with $540 billion of green bonds issued in 2023. Newly issued green bonds accounted for six percent of total bond offerings, although carbon-intensive bond issuance remains approximately 2.5 times higher than green bond issuance each year.

The London Stock Exchange Group predicts that new digital technologies such as artificial intelligence and data centers could fuel further green growth, facilitating more significant use of renewable energy and expanding energy efficiency services.

Noteworthy indicators of this trend include Microsoft's recent record-breaking $10 billion purchase agreement for 10.5GW of solar and wind energy and Google's multi-billion-dollar investment in decarbonizing its data centers and AI technology. These investments were highlighted as key factors driving a 48 percent increase in the tech giant's carbon emissions over the past five years.

The report also points out that nearly all industries generate some form of green revenue, with over 50 developed and emerging markets contributing to the green economy.

The London Stock Exchange Group's latest figures are released in conjunction with the launch of the annual Clean Energy Start-up Radar report from consultancy Oliver Wyman. This report found that global investment in clean energy start-ups slightly decreased in 2023, following a record high of $12.3 billion in 2022.


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