Businesses selling low-carbon goods and services now generate more revenue than the aerospace and defense sectors combined, according to research by HSBC. Yes I did a double take at that too, my first thought was “is this what green initiatives are costing us”? But no according to HSBC’s research 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. These companies are in many instances manufacturing companies making things, creating meaningful employment and wealth. By comparison, the aerospace and defense sector was worth $530bn, reported an article in the FT.
When HSBC started this index in 2004 there were 154 companies in the sector now there are 368. Then 1 million people globally were employed in the sector, now there are said to be 2.4 million. It sounds like the green economy really is living up to the hype as being the new employer, the source of innovation and growth but lets understand what qualifies as low carbon goods and services. The research included only listed companies with a market capitalization of more than $350m that derived more than 10% 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. Needless to say, low-carbon energy generation including solar, wind, bio-fuels and geothermal produced the bulk of the revenues, at $300bn, followed by energy efficiency and energy management products. Obviously not all of these industries are new start ups. Many companies were in these fields prior to 2004 so it is the rate of growth that is interesting.
Not surprisingly, the US leads the rankings with its companies generating revenue of $111bn. Japan took second place with $105bn, Germany stood at about $80bn, I won’t tell you where the UK came. Enterprising people and companies will always respond to a perceived demand or trend. Whether one is firmly in the climate change camp or sitting outside in bemused observation is not really the point here. The fact is these companies and this sector is broadly driven by the same desire of firms and regions to reduce their carbon production, reduce their energy consumption, reduce their environmental footprint or better control their waste that have their origins in the environmental movement. HSBC’s intention is to create investment decisions based on this sector. For us in the metals sector, seeing how fast growth is happening helps us focus efforts for new business and sales opportunities, as aerospace and defense markets finally appear to have reached a plateau after a decade of solid growth.