The carbon economy

Is low carbon economy the answer to the global financial crisis? Is it the next big bubble? According to a research by HSBC, businesses selling low-carbon goods and services now generate more revenue than the aerospace and defence sectors combined, making the sector one of the new linchpins of the global economy.

Listed companies in the climate change sector – including renewable-power generators, nuclear, energy management, water and waste companies – reached a global turnover of $534bn in 2008, according to HSBC. The aerospace and defence sector was worth $530bn, the international bank said. Revenues in the low-carbon sector soared by 75 per cent in 2008 despite the recession. Joaquim de Lima, global head of quant research for equities, said the results were “surprising and very encouraging”, given the financial crisis. “This shows how important this sector is becoming in the global economy,” he said. He noted that the sector had surpassed the growth rates predicted in the Stern review of the economics of climate change, published in the UK three years ago. In the landmark report, Lord Stern estimated that the low-carbon goods and services sector would be worth $500bn by 2050. “This seemingly huge figure has already been surpassed well ahead of time as more and more businesses adapt their business model [to climate change],” said Mr de Lima. Mr de Lima predicted that on current trends, revenues from the sector would exceed $2,000bn by 2020.

An increasing number of companies are entering the sector, with 368 on the HSBC Climate Change Index compared with 154 in 2004. In 2004, the HSBC Climate Change Index listed companies from around the world. Today 368 companies qualify for entry into the index. The US led the index, with its companies generating revenue of $111bn. Japan took second place with $105bn, Germany stood at about $80m and the UK at $14bn. The number employed in climate-related activities worldwide since 2004 has more than doubled from just over 1m to about 2.4m globally.

The research included only listed companies with a market capitalisation of more than $350m that derived more than 10 per cent of revenues from “clean technology” or related services. Only the proportion of sales that came from clean technology was counted – some of which was estimated, as many companies do not fully break out their sales from green activities. Low-carbon energy generation produced the bulk of the revenues, at $300bn, followed by energy efficiency and energy management products. This strong showing came in spite of reported difficulties for companies seeking financing for setting up renewable energy projects and despite a slackening of energy prices in the past two years.

We believe that low carbon economy is the trend of our times and a must do for entrepreneurs and investors. Many financial products have been built for green investments. Especially in south east Europe, financial products from the European Central Bank (Romania, RES projects), the World Bank (Boulgaria, energy efficiency upgrades) and governmental subsidies (Greece, RES, energy efficiency, waste management) seem to boost the region's energy market.