Index provider FTSE Russel promises to "bust the myths" concerning the green economy, as alluded in the title of their latest study (Investing in the global green economy: busting common myths). "Until now the transition to a sustainable and “green” economy has been a loose concept rather than a defined, investable, industrial system,” write the authors in the study’s introduction. According to them, lack of data concerning this sector has led to the belief that this is a small market dominated by companies with small market capitalisation.
Analysts have therefore been interested in the global proportion of market capitalisation exposed to the green economy. "There are about 3,000 companies around the world that are involved in the green economy," says the study. “The green economy represents 6% of the market capitalisation of global listed companies, approximately $4 trillion. This represents a significant investment opportunity, approximately the same size as the fossil fuel sector”, concludes FTSE Russel in this study.
The cloud at the heart of energy efficiency
Behind the $4 trillion, the study examines a wide variety of sectors. The largest sector, with 40% of the share, is energy management and energy efficiency. This ranges from building isolation to cloud computing, as well as the use of decentralised servers. In fact, the use of the cloud makes it possible to reduce CO² emissions from computer networks by 90%. The second-largest sector is energy production, making up 11%, followed by 8% for the food industry, 8% for transport infrastructure, 7% for water management, 6% for energy equipment, and 5% for waste.
Based on these criteria, the study proposes a ranking comprised of companies that contribute the most to the $4 trillion capitalisation related to the green economy (1). And the names are surprising! With 2.4% of the total, Microsoft, a leading provider of decentralised servers, is at the top of the list. In third place, with 1.4%, is the Chinese operator of large hydraulic dams, China Yangtze Power. Amazon ranks fifth with 1.1%, followed by Tesla also at 1.1% due to its lithium batteries. The surprise came in seventh place, with the discovery of Monsanto at 1% of the total. The American company, recently bought back by Bayer, is in this position because of their herbicide-resistant seeds (used in droughts, for example).
A major role for energy efficiency
"Such an analysis reinforces the idea that the transition to a low-carbon economy will not be achieved solely through 'pure players', but one must bear in mind that the list of green activities identified by FTSE is more inclusive than the list of green activities currently being consolidated at the European level. The FTSE listing includes the production of energy from fossil fuels, since the carbon footprint from technology has an advantage over more conventional sectors", explains Nicolas Redon, Climate Finance Program Manager at Novethic.
Redon adds, "This listing also does not take a position on the side effects for the climate and local communities near rare metal mines or large hydroelectric dams, but the sectoral distribution of these green revenues illustrates the future importance of energy efficiency, which already accounts for 40% of revenues. The fact that FTSE chose to extend its definition of energy efficiency to include technological reports, such as cloud computing, explains the presence of digital giants amongst other leading companies in this ranking ".
Ludovic Dupin @LudovicDupin
(1) Ranking: Microsoft 2.4 %, TSMC 2.4 %, China Yangtze Power 1.4 %, ABB 1.1 % Amazon 1,1 %, Tesla 1,1 % Monsanto 1 %, Waste Management 1 %, Siemens 0.8 %, NextEraEnergy 0.7 %, HoneyWell 0.7 %