The numbers that I've already reported this year in terms of the venture capital going into green companies and technologies may just be the tip of the iceberg. A new report from Ethical Markets Media suggests that private green-focused investments now top more than $2 trillion globally. (The U.S.-specific VC investment in cleantech companies was about $4 billion in 2010, with the worldwide number around $7.8 billion, according to various market estimates.)
According to the folks who pull together the so-called Green Transition Scoreboard, that $2 trillion number includes investments made between 2007 and 2010. Ethical Markets Media projects that this number could reach $10 trillion by 2020. What's more, the number doesn't include anything that the company has deemed "unsustainable," such as nuclear energy, biofuels or 'clean' coal. Says the company's president Hazel Henderson:
"This new total is remarkable in spite of economic uncertainty. It indicates that the global transition away from the 300-year fossil-fueled Industrial Era accelerating toward the cleaner, greener information-rich economies of the 21st century."
There definitely is a much more heightened scrutiny by investors of all sorts into the sustainability impact of certain companies. This is just the latest report I've seen suggesting that investors are much more interested in issues of the environmental or corporate social responsibility than in the past. Not necessarily because they are activists but moreso because they see a demonstrable link between corporate sustainability and business value.
Another report I suggest you consult is one from Deutsche Bank's Asset Management Division, which just released something called, "Investing in Climate Change 2011, the Mega-Trend Continues: Exploring Risk and Return."
The report reviews national policies that might affect investments, discusses the "risk" that climate change might pose to certain companies, details the scale of Chinese clean technology initiations, and suggests that state-level projects might be more attractive to investors than federal projects. (Which, frankly, are pretty much in limbo, now, if were a better person.)
In a press release for the report, Kevin Parker, global head for the Deutsche Bank Asset Management Division and an executive committee member, notes:
"Institutional investors are giving greater consideration than ever before to climate change in their assessment of asset allocation. I believe that we have reached a critical point in our industry at which all the talk about climate change begins to translate into action. Asset owners everywhere are starting to move, and their first impulse is to identify where in their portfolios the climate risk lies."
Still not convinced that you should care?
Then you might to peek at a report from Mercer Consulting, which suggests that climate change could add as much as 10 percent to portfolio risk over the next two decades. That is trillions of dollars, both in risk as well as squandered opportunity. The report, "Climate Change Scenarios - Implications for Strategic Asset Allocation," suggests that investments in low-carbon technologies could reach $5 trillion by 2030, while the cost of climate change on the "physical" environment, health and food security could be more than $4 trillion. Here are some suggestions that Mercer makes about how to make portfolios more climate-resilient:
- Add a climate risk assessment to ongoing reviews
- Add more climate-sensitive assets
- Use sustainability-minded market indexes to guide portfolios that are more passive
- Educate fund managers
- Request improved disclosure on climate risk