LONDON: The green economy – the business lines of global listed companies that generate revenue from climate solutions – now boasts a record high market value of US$10 trillion.
The increase occurred as revenue tied to environmental products and services climbed to US$5.5 trillion last year, expanding at its fastest pace since 2022, according to a report published on Wednesday by London Stock Exchange Group Plc (LSEG).
Investors have rewarded that growth: Companies deriving over 20% of their income from green activities have been outperforming the broader equity market.
The S&P Global Clean Energy Transition Index has surged more than 80% since end-2024, more than double the return of the S&P 500.
Despite rising geopolitical tensions and a retreat from climate priorities in some major economies, led by the United States, green industries have proved remarkably resilient. That’s partly as the energy transition is entering a new phase driven as much by security and economic competitiveness as by decarbonisation, LSEG said.
For investors who have soured on green stocks, the industry’s growth should create “an urgency to have another look” and reassess their exposure, said Jaakko Kooroshy, global head of sustainable investment research at LSEG.
LSEG defines the green economy as the proportion of companies’ revenues generated from environmental solutions, ranging from renewable energy and clean water to energy efficiency and recycling.
The firm assessed the revenue exposure to green business activities of more than 21,000 companies globally.
Revenue growth was broad-based over the past year, with 99 of 133 categories of green products and services posting gains.
Electric vehicles and so-called advanced batteries were “a particular bright spot”, adding US$62bil of revenue, LSEG said.
LSEG also examined mergers and acquisitions, which it said are “becoming an increasingly critical mechanism for accelerating the low-carbon transition”. Green-related merger and acquisition totalled US$4.1 trillion over the past decade, accounting for almost 13% of total global deal value, according to LSEG.
Dealmaking has continued this year, led by NextEra Energy Inc’s agreement to pay about US$67bil in stock for Dominion Energy Inc.
The proposed transaction would create “one of the largest green energy behemoths in North America”, Kooroshy said.
“It’s not a green pure play, but it’s a huge green energy company that’s forming there.”
Together, NextEra and Dominion would generate more than US$15.9bil of green-related revenue from wind, solar, nuclear and battery storage, LSEG said.
That would represent about 36% of the combined company’s total revenue.
Even with a policy emphasis that’s “shifted to focus on domestic oil and gas production,” the US remains the largest green economy by market capitalisation, accounting for 57% of the global total, LSEG said. — Bloomberg
