I have been spending two days in Chicago at the Sustainable Manufacturing Summit. The focus is on corporate strategies for clean, green production. One of the most interesting presenters was Kevin Bourne, Managing Director of Equities for HSBC, the world's largest banking group, and the sixth largest company in the world. HSBC is convinced that products and services linked to climate change is a growing market and it created an impressive analytics framework to help investors direct their capital to this niche.
HSBC divided the market into four large categories, with 18 sub-segments:
- Production -- Low carbon energy production
- Efficiency -- Energy efficiency and energy management
- Adaptation and mitigation -- water, waste and pollution control
- Finance -- capital deployment and financial products
Using a team of 70 analysts (only the world's largest banking group could afford to do that!) they combed through the 65,000 publicly traded companies with valuations over $7 million and created a list of 1,200 companies with more than 10% of their revenues in these 18 market sub-segments. This final list of companies constitutes their "Global Climate Change Index." Some startling statistics on this market niche:
- In December of 2007, these companies represented 2.5% of the market. In December of 2008, this had grown to 4% -- a stunning one-year growth rate of 60%.
- While "experts" had predicted that the climate change market might grow to be $500 billion by 2050, it already exceeds $300B.
- The climate change market is larger than the global semiconductor market, and almost as big as the global auto components market. It is bigger than the GDP of Thailand, Ireland or Argentina.
HSBC's expectations are for rapid growth -- especially in the adapatation segment of the market. And market growth will be aided by the global stimulus packages of national governments. Approximately 15% of the global stimulus cash ($446 billion) will go to companies in these 18 segments. (Note that 25% of China's stimulus money, and fully 80% of South Korea's, went into green products and services, whereas the US figure was only 12%.)
When the largest banking company in the world takes the climate change market as a serious investment opportunity, there is little doubt that: 1) climate change is real; and 2) it will generate economic opportunity.
Stay tuned. The pace will only quicken. |
