The green economy saw a 198% total return over the past decade

The green economy, encompassing industries that contribute to reducing carbon emissions, has delivered a 198% total return over the past decade, Bloomberg reports, citing a study by the London Stock Exchange Group (LSEG). If evaluated as a single industry group, companies accruing revenues from decarbonization products and services have had the second-best financial performance of any equity sector in the past decade, the research finds. The tech industry, supported by recent breakthroughs in AI, remains the frontrunner.

Energy management and efficiency have led the charge within the green sector, outpacing renewable energy. The green economy now represents 8.6% of global listed equity markets with a market cap of USD 7.2 tn and a 14% compound annual growth rate.

The breakdown: LSEG’s research — which assesses over 19k companies globally — identifies more than 4k firms generating revenue from green products and services, Bloomberg adds. The FTSE Russell Environmental Index, which includes companies with significant green revenues, has outperformed the FTSE Global All Cap by 82% since 2008. The index's success is attributed to sectors such as energy management and efficiency, which have grown at a 17% compound annual growth rate over the last five years.

The outlook: The green economy faces challenges including overcapacity in sectors like solar, as well as trade barriers that affect renewable-energy equipment and EV manufacturing. Protectionist policies such as the US and EU tariffs on Chinese EVs also present a challenger as increased trade friction, the study concludes.