“Climate change has become a defining factor in companies’ long-term prospects…But awareness is rapidly changing, and I believe we are on the edge of a fundamental reshaping of finance.“
– BlackRock Chief Executive Larry Fink
We’re witnessing a structural long-term shift with environmental concerns rising to the top of many corporate and financial industry agendas. Companies such as Tesla are pushing the boundaries of what’s possible, traditional vehicle manufacturers are moving from fossil fuel to electric and the past decade or so has seen a marked rise in new disruptors in the mobility space including Lime, Bird and MaaS app technology platforms such as TripGo.
The green economy, of course, is much larger than just transport. The FTSE Russell breaks it down into 10 sectors, including clean transport. In total, these 10 sectors comprise 64 subsectors and 133 micro sectors. It’s a sizeable space, in which transport plays an important role – and one which brings much-needed innovation and alternative solutions to help put the brakes on our environmental problems.
In our last article, we discussed how global governments are driving this shift through new initiatives, policy and legislation (read it here if you missed it). Being supported from the ground level is part of the battle towards more sustainable living. In this second half, we’ll turn our attention to how financial markets and investors view the green economy and what this could mean for mobility-as-a-service (MaaS).
Is the green economy big business?
There has long been the notion that environment and economy are mutually exclusive, but is this true? Or are they, in fact, two sides of the same coin? What’s more, how much is this green economy worth? Does it stack up when it comes to investment?
The FTSE Russell article ‘Putting numbers to the global green economy’ provides some interesting insights. It shows the green economy is becoming a larger and larger part of the global economy, having ‘strongly outperformed wider indexes’.
Perhaps even more interesting is their headline finding which shows ‘green revenues’ to have a market cap of US$4.3tn which equates to ‘5.4% of the total value of global listed equities’. Considering FTSE Russell puts the oil and gas sector at around 3% of the market, this makes the green economy ‘materially larger’.
Opportunities for growth and investment
While there is still a long way to go to deliver on the Paris Agreement, the green economy is clearly one of growth. When FTSE Russell first tracked its size in 2009, the market cap was around US$2tn. It’s since seen annualised growth of 8% – twice the rate of the broader economy.
Look on any stocks and shares site and you’ll see the number of environmental, social, governance (ESG) and green funds have also risen. This seems to be reflected in news reports too, with one media outlet highlighting that the green investing ‘mega trend’ was here to stay: ‘2019 saw a total of 479 green bonds issued worldwide, up by a quarter compared to the previous year’ (source: CNBC). It also reported that the growth in investor demand was driving hedge fund ESG investing. Outlets such as Morningstar have entire sections on the theme.
Investors want to know that the companies they invest in show good environmental and social governance – and they’re prepared to vote with their money. Others no doubt are backing what they see as a fundamental trend with a good deal of potential upside. With governments putting their weight behind the green economy and companies following suit, the financial industry is sitting up and taking notice; after all, a few of these companies could potentially become some of the world’s most valuable corporate names in years to come.
Indeed, BlackRock CEO Larry Fink commented, “Climate change is almost invariably the top issue that clients around the world raise with BlackRock. From Europe to Australia, South America to China, Florida to Oregon, investors are asking how they should modify their portfolios” (source: CNBC).
What this could mean for MaaS
With governments, businesses and investors backing the green economy, this increases the opportunities for MaaS. Traditional fossil fuel car manufacturers are turning to electric vehicles, investing billions of dollars. Even if consumers are tentative to shift away from petrol and diesel right now (due in part to higher prices and lack of electric charging points), the time will come when they have to make choices.
Several factors could play a role in their ultimate decision. A good proportion of people may continue to work from home post-Covid, with infrequent visits to the office. Cities continue to make it less enticing for people to use their cars in certain zones too. The government push for the electrification of public transport and taxi fleets, combined with the rise of micromobility, cycling and walking, means more options are becoming available to people – all of which could be easily accessible via MaaS, bringing together low CO2, resource-efficient, socially responsible and affordable modes on one platform.
MaaS apps provide a much-needed tool for governments, businesses and other organisations to make sustainable transportation easily accessible for travellers, and potentially reduce the number of cars per household. In addition, it allows for analysis of utilisation and other data to make wiser decisions to improve efficiency, uncover potential new services opportunities and improve returns on investment.
From alternative fuels and transport modes to technology for smarter transport systems and infrastructure, there’s growing confidence in the long-term potential of the green economy. And that’s a good thing. We believe sustainable transport underpinned by technology, including MaaS apps, can help to both support the green economy and offer potential investment opportunities while providing a cohesive experience for travellers.
After all, decoupling our economy from environmental concerns is completely misleading. The two go hand in hand, representing opportunity and ultimately sustainable prosperity – and health – across the globe. The green economy, in our view, will be a great investment choice in years to come.
SkedGo provides the technology and intelligent algorithms to power MaaS applications. If you’d like to discuss your MaaS project, we’d love to hear from you. We’d also be interested to hear from potential investors. Please feel free to get in touch.
Photo by Andrea Piacquadio from Pexels
