We must take some critical steps if we want to build a truly green economy — a steady state that meets global needs without undermining the life-support systems of the planet. Clearly we need to move beyond fossil fuels. We need to scale back the amount of energy and materials we’re consuming, especially in OECD countries. We need to build a durable infrastructure, supportive of a low-carbon future. One way to take these critical steps is through smart investments. With governments stubbornly open to dangerous Industrial Era methods like nuclear power, despite the crisis in Japan, smart investments must come from the private sector. The good news is that private investors are taking a strong lead, as demonstrated by the most recent update of the Green Transition Scoreboard® (GTS).
The GTS is a tool for tracking private investments in green markets, and the February 2011 update reveals an encouraging $2 trillion worth of investments in the green economy since 2007. This amount is significant because many studies, computer models and reports indicate that investing $1 trillion annually between now and 2020 can ramp up material and energy efficiencies; reduce the costs of wind, solar and geothermal energy; increase sustainable land use and forestry; and support smart infrastructure, transport, building and urban re-design, all of which are necessary to achieve the green transition to a steady state economy.
The updated numbers for 2010 put global private sector investors on track to reach $10 trillion in investments by 2020! How can more investments support a steady state? The key is to spur substantial investment in the right sectors. It’s a winning proposition, as smart investing can help societies use fewer energy and material resources and provide needed employment opportunities.
The GTS tracks five sectors:
- Renewable Energy;
- Efficiency and Green Construction;
- Smart Grid; and
- Corporate R&D.
Renewable Energy includes private technology development, equipment manufacturing, and project finance. The Efficiency and Green Construction sector includes new building construction and existing building retrofits. Cleantech is a broad sector, encompassing agriculture, air and environment, energy efficiency, infrastructure and storage, materials, recycling and waste reduction, transportation and water/wastewater. Smart Grid includes companies actually putting smart grids in place, building the infrastructure rather than designing the technology. Together, these first four sectors account for over $1.8 trillion in investments since 2007.
|INVESTMENTS in the GREEN TRANSITION
2007 – 2010
|Efficiency and Green Construction||282,011,000,000|
Corporate R&D in green transition technologies alone accounts for over $163 billion in investments. The GTS is the only source of aggregate corporate green research and development investments, specifically tracking R&D dollars for innovative technologies that reduce the use of natural resources and minimize environmental impacts.
Several subsectors, such as nuclear, biofuels and coal carbon sequestration, have been purposefully omitted either because of controversy or lack of consensus that they will make a long-term contribution to sustainability.
To meet the challenge of achieving a sustainable and fair economy, investment funds need to be shifted away from ill-conceived hedge funds and dark pools, and away from sectors that depend on fossil fuels. A modest goal for global private investment would be to direct 10% of portfolios to companies driving the global green transition. With the data in the GTS, security analysts can update their asset allocation models to highlight green markets.
The future of the economy will be determined by the investments we choose today. Institutional investors need information like what’s provided by the GTS to make wise decisions. As Ethical Markets Media continues to improve the Green Transition Scoreboard and as green sectors emerge around the world, investors will play a key role in building a 21st century economy that provides prosperity within the capacity of the planet.
Rosalinda Sanquiche is the executive director of Ethical Markets Media.