The global green economy has returned to form this year after a downturn in 2022, according to FTSE Russell.
The index division of the London Stock Exchange Group said in a report that the performance of the green economy, as measured by the FTSE Environmental Opportunities All-Share Index (EOAS), underperformed the market in 2022 due to high inflation, rising interest rates amd geopolitical tensions, exacerbated by a post- pandemic valuation premium.
However, this year the EOAS Index recovered all the underperformance from 2022. The report highlighted that EOAS has outperformed the FTSE Global All Cap by 76% on a US dollar total return basis from its inception in 2008 to the end of June 2023.
Green revenues accounted for 7.2% of total revenues across 15,000 listed companies in the universe by December 2022. FTSE Russell said the 10-year average for green revenue growth rate is 6.6%, materially higher than the 5.1% revenue growth of the broader listed equity market.
“The average market capitalisation of pure plays (companies with 100% green revenues) reached over $7bn by June 2023—more than a six-fold increase since 2016,” said the report.
The FTSE Russell Green Revenue Classification System is based on the index provider’s bottom-up assessment of revenues of over 18,000 listed companies globally.
FTSE Russell said: “With green revenues growing on average over $300bn per annum in the last five years, we project green revenues will exceed $5 trillion by 2025.”
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