According to a report from the London Stock Exchange Group (LSEG), over the past decade, the total market returns of green economy companies have reached 198%, second only to the technology sector. The estimated total market capitalization of the green industry currently stands at $7.2 trillion, with a compound annual growth rate (CAGR) of 14% over the past ten years. However, trade conflicts and tariffs might slow down the development of the green energy sector in the future.
As defined by LSEG, the “green economy” includes companies involved in the generation of revenues from renewables and the mining and processing of critical minerals. The FTSE Russell Environmental Opportunities All Share Index is used as the benchmark for the green economy sector. Since 2008, this index has outperformed the FTSE Global All Cap by 82%.
Renewable energy has lagged in the performance of the green economy, but LSEG believes that the energy transition will be a “mega force” to watch in the coming years. In contrast, the top performers over the past decade have been green energy companies primarily focused on energy efficiency and management.
Despite the generally positive outlook for the green economy, the sustained growth of stock prices and the pace of the energy transition still face obstacles. Jaakko Kooroshy, global head of sustainable investment research at LSEG, indicated in an interview that these obstacles include trade tariffs that might slow the rollout of clean energy technologies.
Incentives for domestic green energy manufacturing in the U.S. and EU are set to boost growth, but tariffs on Chinese electric vehicles could undermine clean energy goals and escalate trade tensions. Just last week, China announced it would initiate anti-dumping investigations on EU imports, including brandy and pork. This marks a new phase in the tariff dispute, following the start of provisional EU tariffs on China-made electric vehicles.
