Does $6.2 Trillion in Green Investments Matter to the Global Economy?

My latest Green Transition Scoreboard research showed more than $6.22 trillion of private investments into the green economy globally since 2007. I talk about it and most people’s eyes glaze over. I lost them at the word trillion… 

Ok, so it’s a heck of a lot of money that is being invested in all different types of green infrastructure. Renewable energy, green buildings, smart grids, energy efficient water infrastructure, and R&D on all sorts of different clean technologies. We take care to consider what should and shouldn’t be included in the tally. Bandaid technologies like ‘clean coal’ and carbon capture & sequestration are obviously omitted, as are most biofuels because they are a tradeoff between food & fuel (only biofuel from algae is included). We have pretty strict standards, as dictated by the remarkable Hazel Henderson who serves as our moral compass and futurist.

The scoreboard gives us a methodology to calculate the growth of the global green economy. We are not counting consumption - this isn’t about people buying organic groceries or hybrid cars. These are investments in sustainable infrastructure that (hopefully) will stand the test of time. Studies suggest that we need about $1 trillion invested annually in the green economy to avert the worst-case climate scenarios and avoid the 5% to 20% drag on global GDP growth. 

So how are we doing? Pretty damn well!! We started measuring in 2007 and look at how far we’ve come:

 GTS_growth.png

Using this data, it’s easy to calculate the compounded annual growth rates (CAGR) of the green economy: 1yr - 10.8% ; 3yr - 7.2% ; 5-yr 12.6%. Okay, so the 5-yr figure is kind of cherry picking since it starts at the low Great Recession levels. But even the 6% 7-yr CAGR of the green economy is twice that of global GDP, who’s CAGR has been stagnant (although stable) at about 3%. Since 2007, the green economy has been growing much faster than the rest of the global economy.

However, I do need to be realistic about the scale of the green economy (or lack thereof). Global investment was about $19.4 trillion in 2014, so the $879 billion into the green economy is less than 5% of total investments. This figure is disappointing in that the green economy is still just a fraction of the overall economy, but I’m going to go glass-half-full and suggest that it means there’s lots of room to grow. The green economy will sustain double-digit growth for a couple of decades as it slowly envelopes the traditional economy.

I also want to compare the 2013 $793 billion figure to the amount invested in fossil fuels that year - or as I’ve started calling it ‘the brown economy’. About $1 trillion was invested in the extraction, transport, refining, and burning of fossil fuels in 2013. It’ll be interesting to see keep an eye on the next report since the collapse of oil prices has caused capital expenditures to decrease. 2014 might have been the first year that investments in the green economy surpassed those in the brown economy. If it wasn’t 2014, I’m willing to bet it’ll happen in 2015.

Any way you slice it, the green economy is in the midst of a global boom. Investors should act quickly (if they haven’t already), or risk getting left on the sidelines of the next major industrial revolution.


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