Putting a price tag on clean investing

Pension funds and asset managers are among those who could create $20 trillion in new wealth if the world economy transitions to zero carbon and zero waste policies, according to new research.

Professor Martina Linnenluecke, who leads Macquarie University's Centre for Corporate Sustainability and Environmental Finance, says market forces will drive the clean-energy momentum with investors, asset managers and representatives from pension funds motivated by the potential of this new wealth, in a new paper "How markets will drive the transition to a low carbon economy".

Her analysis estimated that the total wealth created by the development of cleantech patents ranges from US$10.16 to US$15.49 trillion dollars which is 13%-20% of the world GDP in 2017.

Additionally, this will involve an extra investment stimulus to the economy from US$2.93 to US$3.71 trillion which is 3.7%-4.7% of the world GDP in 2017.

Countries that are stricter with their carbon policies (in the form of carbon taxes or emissions trading schemes) and invest more into public research and development have historically enjoyed a greater level of cleantech patent intensity, the research found.

"The research also shows that green innovative firms are located in areas with stronger environmental regulations. While environmental policies can introduce additional costs for firms, a more stringent regulatory environment is seen as conducive to the development of environmentally friendly technologies, as it forces firms to innovate," she said.

Cleantech is a fast-growing patent class, showing signs of becoming the next technological breakthrough, the research shows.

"However, this wealth creation also comes with a significant amount of investment requirements and investment risk. Governments, policymakers and grass root support have got us to this stage in history, now its business that will drive the transition to a cleantech future," Linnenluecke said.

Read more: CleantechProfessor Martina LinnenlueckeCentre for Corporate SustainabilityEnvironmental FinanceMacquarie University
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