TODAY’S STUDY: THE GROWING MOMENTUM DRIVING THE GREEN TRANSITION

Green Transition Scoreboard® 2012: From expanding Cleantech Sectors to emerging trends in Biomimicry
Hazel Henderson, Timothy Jack Nash, Rosalinda Sanquiche, February 2012 (Ethical Markets Media, LLC)

Executive Summary

The Green Transition Scoreboard® (GTS) is a time-based, global tracking of the private financial system for all sectors investing in green markets. This update of the GTS has found investments totaling more than $3.3 trillion in the green economy since 2007, with Asia, Europe and Latin America catching up with the USA.

This amount validates the many studies, computer models and reports proposing that investing $1 trillion annually until 2020 in material and energy efficiencies, wind, solar, geothermal and other renewable energy, sustainable land-use and forestry, smart infrastructure, transport, building and urban redesign will solidify the Green Transition worldwide. The updated 2012 report finding of over $3.3 trillion puts global investors and countries on track to reach $10 trillion in investments by 2020.

As investment funds shift away from more speculative sectors such as hedge funds, private equity and commodity ETFs, as well as other fossilized sectors, and redeploy at least 10% of their portfolios directly in companies driving the global Green Transition, the $10 trillion by 2020 goal is well within reach. With the data in the GTS, security analysts can update their strategic asset allocation (SAA) models to highlight green markets, as now recognized in the report by Mercer which suggests 40% of portfolios should be in green sectors – half to hedge against climate risk and half to capitalize on these opportunities (see Appendix 3).

The Green Transition Scoreboard® tracks five sectors: Renewable Energy, Green Construction and Efficiency, Cleantech, Smart Grid and Corporate R&D. Renewable Energy includes private technology development, equipment manufacturing, project finance and M&A activity. Green Construction and Efficiency includes new building construction, existing building retrofits and, newly added this year, efficiency financing.

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Cleantech is a broad sector and includes sustainable agriculture; air, water and environment; energy efficiency and storage; infrastructure; materials; recycling, reuse and waste reduction; and transportation. Smart Grid includes companies actually putting smart grids in place, building the infrastructure rather than designing the technology.

Together, these first four sectors account for over $2.9 trillion in investments since 2007, alone higher than last year's five sector total of over $2.4 trillion.

Corporate Research and Development (R&D) in green transition technologies alone accounts for over $329 billion in investments. The Green Transition Scoreboard® is the only place to find aggregate corporate green research and development investments, specifically tracking R&D dollars for innovative technologies that reduce the use of natural resources and minimize environmental impacts.

Several subsectors such as nuclear, biofuels and coal carbon sequestration have been purposefully omitted either because of controversy or lack of consensus that they will make a long-term contribution to sustainability.

Companies, organizations and the sources of financial data included in the GTS are screened by rigorous social, environment and ethical auditing standards. Data sources include the highly respected Cleantech Group, LLC, many United Nations, European and NGO reports, and traditional reporting sources such as Bloomberg, Yahoo Finance, Reuters and individual company reports.

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This report highlights the tremendous body of work supporting the importance of moving forward quickly and substantively in green investments. Appendix 3 references all the works mentioned in the report and dozens of additional sources with similar findings and recommendations.

Many developing countries where these technologies are of paramount importance lack the resources to compile the kind of data found in this report. Yet, we report that these countries are taking advantage of "leapfrog" strategies for greening their economies, avoiding stranded assets and legacy technologies and drawing on available local resources in a more cost effective, time effective manner than technologies from the fossil-fueled era. Given Appendix 3 listing the research cited in this report and much more, touching on a myriad of green sectors and regions around the world, we provide a useful tool not only for institutional and other investors but for national and international policy makers.

The Green Transition Scoreboard® was created as a public service to help grow the green economy and reform market metrics and due diligence worldwide. The full report and other supporting materials are available online. To provide this information as widely as possible, we are making the GTS available to those UN agencies spearheading the UN's Green Economy Initiative and to organizations participating at the UN summit in Brazil, Rio+20. We are partners with many of these organizations, including the global Green Economy Coalition.

The Green Transition Scoreboard® is a trademarked, ongoing program of research with new reports published every six months. We intend to deepen this research, expanding current categories and adding new ones as green sectors grow and develop in many countries. We see this global green transition as part of the human evolutionary process as we progressed from the Iron and Bronze Ages to using wood, coal, whale oil and petroleum.

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Inside the Global Green Transition…Overview by Hazel Henderson

In Q3 2011, the Green Transition Scoreboard® totaled private investments in green sectors since 2007 worldwide at $2.4 trillion. Our new total of $3,306,051,439,680 confirms our view that this transition is on track to reach the $10 trillion we project by 2020. This global transition follows many earlier phases of human societies' evolution as our technologies evolved from the Iron and Bronze Ages through the energy transitions from wood to coal, whale oil to petroleum. As I noted in our 2011 update, this current transition from fossil fuels to greater efficiency and renewable energy and resources is simply the next stage in human knowledge and scientific progress. This has been forecast since the 1970s by the US Office of Technology Assessment…

As OECD Secretary-General Angel Gurria recently stated, "Green growth strategies focus on ensuring that natural assets can deliver their full economic potential."

This and our review of over 100 studies since 2010 was the basis for our recommendation that pension funds and other institutional investors shift at least 10% of their assets to green investments. The Mercer report of February 2011 recommended a shift of 40%: half to hedge against climate and environmental risk and half to capitalize on opportunities in green sectors. Mercer's follow-up survey of 14 asset-owner partners found more than half had already conducted the process of or planning to review their holdings, based on the report's findings…

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Renewable Energy

Investments in Renewable Energy include private technology development, equipment manufacturing, project finance and M&A activity. The sector is divided into current investments by year of funding and future commitments.

Renewable energy investments continued to soar in 2011, up 22% from 2010’s level. Solar gained the most ground, although wind kept the largest market share. The vast majority of investments continued to come in the form of asset financing for new projects.

The majority of the current investment numbers are based on global trends reporting by Bloomberg New Energy Finance under contract with UNEP1 as well as other international studies…

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Green Construction and Efficiency

Investments in Green Construction and Efficiency include new building construction and existing building retrofits. The sector is divided into current investments by year of funding.

This sector is the most under-reported of any in this report. We are only counting green construction materials, not including labor. The value of global green buildings, for example, is significantly higher than what is reported here.

In previous reports, we aggregated the numbers for this sector. This year we have found that conservation efforts are wide ranging and reported using a myriad of terms. Also, the magnitude of investment in each subsector makes for useful comparison. As Amory Lovins of the Rocky Mountain Institute has long held, a foundation of sustainability is conservation. Investments in efficiency are more than $204 billion or 6% of total Green Transition investments.

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Cleantech

Cleantech is a broad sector and includes companies in the following areas: agriculture; air and environment; energy efficiency, lighting, infrastructure and storage; materials; recycling and waste; transportation; and water/wastewater.

Cleantech figures are derived in cooperation with The Cleantech Group, LLC, based on their quarterly reporting. For this report, Cleantech Group removes those investment categories which we have chosen not to include in the GTS such as biofuels, clean coal and carbon offsets.

The recent burst of activity in the Mergers & Acquisitions space is largely due to companies that have been hoarding cash since the 2009 credit crunch. They are finally ready to deploy capital and are expanding into the green space. In addition to developing R&D in-house, firms like Google, DuPont, and Toshiba are acquiring small and medium-sized cleantech companies…

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Smart Grid

The Smart Grid sector includes investments in those companies actually putting smart grids in place, building the infrastructure rather than designing the technology. The sector is divided into current investments by year of funding and future commitments.

Smart grids can either centralize energy systems or be designed to serve local cities and areas in decentralized "islanded" models, as described by Amory Lovins and Jeremy Rifkin in their recent work…

As we point out (page 6), smart grids are leading the monitoring revolution which is marrying information technologies ever closer to renewable energy and allowing for decentralizing homegrown economies. Current investment numbers for 2007 through 2010 are available from IC Insights…Based on personal correspondence, the research team chose to conservatively discount IC Insight figures by 60% to account for government spending on infrastructure…

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Corporate R&D

The Green Transition Scoreboard® is the only place to find aggregate corporate green research and development (R&D) investments. We know of no other organization specifically tracking Corporate R&D in green transition technologies.

Corporate R&D includes investments in innovative technologies that reduce the use of natural resources and minimize environmental impacts, with green investments self-defined by each company. The sector is divided into an aggregate of current investments covering 2007-2011 and future commitments…

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Conclusion

The Green Transition Scoreboard® was created as a public service to help grow the green economy and reform market metrics and improve due diligence worldwide.

One of the many reasons we created this information base on private sector investments in green sectors is because many developing countries where these technologies and their "leapfrog" strategies are of paramount importance lack the resources to compile this data. Green technologies often draw on available local resources in a more cost effective, time effective manner than fossil fueled era, dated technologies.

To provide this information as widely as possible, we are making the GTS available to those UN agencies spearheading the UN's Green Economy Initiative and to advising organizations of Rio+20 of which we are a part, as members of the Green Economy Coalition.

We welcome enquiries from public agencies and those wishing to present our results at conferences, webinars and other venues.

Ethical Markets Research team members Hazel Henderson, Timothy Nash and Rosalinda Sanquiche are available to answer any questions and for interviews on the findings of this report and the continuing process of tracking investments in the green economy.

The Green Transition Scoreboard® is an ongoing program of research with new reports published every six months. We intend to deepen this research, expanding current categories and adding new ones as the green sectors grow and develop in many countries.

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The report is a collaborative effort from colleagues in all sectors of the global green economy, drawing on Ethical Markets Media’s daily collating and evaluating of green economy news from worldwide sources such as

-Australia: Climate Risk Pty
-Brazil: Mercado Etico, Instituto Ethos
-Canada: Cleantech
-China: CSR China, Syntao
-European Union: Green Economy Coalition,Network for Sustainable Financial Markets, REN 21
-Hong Kong: ASRIA
-UK: Forum on the Future, Institute for Chartered Accountants in England and Wales, Green Economic Institute, New Economics Foundation, Responsible Investor, Tomorrow's Company
-USA: ACORE, American Council for an Energy-Efficient Economy, American Sustainable Business Council, Calvert, CERES, CSRWire, GreenBusiness, Greentech Media, New Economics Institute, NewEnergyNews, New World Energy News, World Business Academy

and many other groups reporting on the green transition around the world.