Downturn spurs on green agenda

Governments around the world have been spurred on by the downturn to do more, not less, to combat climate change. That’s the powerful conclusion for the ‘green economy’ agenda which emerges from a report by specialist asset managers at Deutsche Bank (DB). But there’s still widespread worry about whether – and where – more opportunities for a game changing ‘green new deal’ are going begging.

The DB Climate Change Advisors’ report identifies a combination of 250 new regulatory initiatives supporting climate change action (particularly to mandate more use of renewable energy) and over $200 billion worth of green spending and incentives in the recent stimulus packages introduced in the US, China, the EU and elsewhere. And it credits this double push with providing attractive opportunities to investors in such key areas as:

• scaling up solar electricity and wind power generation
• energy-efficient buildings and lighting
• opening up the prospect of a ‘smart grid revolution’ 
• developing mass market hybrid and all-electric vehicles (such as GM's Volt) – with $26 billion going into battery technologies, fleet purchasing and helping manufacturers re-tool.

Mark Fulton, DB’s global head of climate change research, believes that the overall trend of stimulus action “will provide crucial support to climate change industries during the current global economic downturn”.

Without it, the outlook could be grim. Global investment in clean energy technologies (including wind, solar, biomass and tidal) rose 5% to $155 billion in 2008, according to Angus McCrone of New Energy Finance. But, he warned, “we will struggle to get anywhere near those levels” in 2009, with developers strapped for funding in the credit crunch, and the price of fossil fuels tumbling.

What is striking, though, is how company values in the renewable energy sector – and other green technologies –have consistently outperformed the global stock market average. Over five years to the end of February 2009, a new set of FTSE indices show the peaks and drops in startling relief – but the renewable and alternative energy index records an overall increase in value of 42.5%, while the FTSE global all cap index has fallen by 17.4%.

These companies should continue to offer superior growth in the long term, Will Oulton, FTSE’s Head of Responsible Investment, told Green Futures. “I’m not finding many people who’d disagree with that,” he added. The impact of stimulus packages has yet to be fully felt, he believes, and will continue to feed through into the market this year and next as it becomes clearer where the money is actually going to be spent. Commitments on carbon cutting and switching to more renewable energy should contribute to the momentum, he believes – and much of the potential that’s been sitting in small companies will go on proving attractive to major global business. – Roger East

14 May 2009

Roger East