London Stock Exchange's Green Economy Report 2021
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Where there’s green, there’s growth Green Economy Report 2021 An LSEG Business Contents Green Economy Mark 2021: highlightsconomy 4 Introduction 7 COP26: a moment – and momentum 10 LSEG: supporting the global sustainable finance ecosystem 12 What is the green economy? 15 Green Economy Mark: key themes and trends 18 Green Economy Mark companies and funds list 30 Methodology 34 Case studies 37 Guest article: Leading the green energy revolution with 55 Green Economy Mark company ITM Power Conclusion 58 Green Economy Report 2021 3 Foreword As companies make the transition Exchange Group) uses its convening It was launched to increase the to a greener, net-zero future, they power to bring together investors, visibility of listed companies and need support – from their customers issuers, policy makers and regulators funds on London’s markets that are and employees, from government, to drive action on climate change. It contributing to achieving positive regulators and wider stakeholders. is crucial that the capital markets are environmental objectives, such Equally importantly, they need oriented towards long-term sustainable as climate change mitigation and support from investors and capital development. adaptation, waste and pollution markets, which themselves have The pace of change and innovation in prevention, and the transition to a sustainability at their core. A sustainable finance in London has been circular economy. convening venue, stock exchanges remarkable over the last few years. Our I’m delighted to welcome this second play a pivotal role in mobilising Sustainable Bond Market has recently Green Economy Report, which this support. reached an important milestone of 300 introduces the 101 companies and As one of the world’s largest capital active bonds listed, which have helped funds now accredited with the Mark. markets and sitting at the heart companies and institutions to raise They are tangibly and measurably of the global financial system, $100bn+ in sustainable financing. playing a vital role in accelerating London Stock Exchange enables long- Having been the first exchange in the the transition to a low-carbon or net- term investment and capital raising world to launch a dedicated Green zero carbon economy, and we should to support the rapidly growing green Bond Segment, in 2021 we became the applaud – and continue to support – economy and the greening of the first exchange to launch a Transition their achievements. overall economy. Bond Segment, designed to support Since joining London Stock Exchange companies to raise debt finance to Julia Hoggett this year, I have been deeply struck support transition projects. CEO of London Stock Exchange plc by the commitment across the The Green Economy Mark is an organisation to support the transition important example of the support that to a greener, more sustainable economy London Stock Exchange provides to – and by the way LSEG (London Stock companies on their green journey. Green Economy Report 2021 4 Green Economy Mark 2021: highlights Green Economy Report 2021 Green Economy Mark 2021: highlights 5 Year-to-date, five issuers qualified for the Mark 36% at IPO: corporates AMTE Power equity issuers Aquila Energy Efficiency Trust Foresight Group Holdings now hold the increase since its launch Green Economy Mark in October 2019 musicMagpie VH Global Sustainable Energy Opportunities closed-end funds £148.5bn This represents a 120% increase from combined market the combined amount in 2020. capitalisation listed on quoted on AIM Main Market Green Economy Report 2021 Green Economy Mark 2021: highlights 6 Green Economy Mark issuers account for: 48% £8.86bn 9% 5% raised by Green of total capital raised of the total number Economy Mark issuers in 2021 year-to-date of equity issuers 1 of UK issuers with the Mark generate in the last 24 months to fund further international revenues innovations, R&D and to build capacity in growing green markets. 27 issuers with the Mark have +16% raised a combined the year-to-date share price performance2 25% £2.6bn Representing a 5% outperformance of the FTSE All-Share Index. in 2021 year-to-date of issuers with the Mark largest sector on are international equity markets 1 1 April 2019 to 31 March 2021 2 Weighted average 3 When grouped together as a sector, by issuance (both primary and follow-on) since 1st January 2020 Green Economy Report 2021 7 Introduction The enormous scale of the environmental challenge facing our planet confronts us all. Politically, economically, socially, financially and technologically, the global landscape is taking on a greener hue. There is a deeper and more urgent understanding of the risks and repercussions of climate change to ecosystems, societies, markets and to companies. Green Economy Report 2021 Introduction 8 The June 2021 G7 Summit was The G7 countries are moving towards Green taxonomies are now being put unequivocal in calling for an acceleration making climate disclosures mandatory into place, against which investors in investment towards climate change across their respective economies. This and, in some cases, companies, must mitigation and adaptation. “Huge leaps year, G7 finance ministers committed for report. Importantly, taxonomies enable in innovation are required to reach the first time to embed climate change investors to identify environmentally our net-zero goals, and infrastructure and biodiversity loss considerations into sustainable economic activities6. investment to reduce emissions and economic and financial decision making. mitigate climate impacts still lags far They described it as “a major step Central banks such as the Bank of behind,” they said, citing the OECD towards ensuring the global financial England and the European Central Bank estimate that $7trn needs to be invested system plays its part in the transition to are attempting to future-proof their annually until 20304. net-zero, as investors better understand operations by running new stress tests how firms are managing climate risks of the banks’ exposure to the effects of and can allocate finance accordingly5.” climate change7. Green Economy Report 2021 Introduction 9 Investors Investors plan to double their allocations Sustainable funds attracted all-time Investors increasingly recognise the to sustainable products over the next five high inflows of €120bn in the first quarter threat posed by climate change, to both years, according to BlackRock’s Global of 2021, representing more than half of the global economy and to their ability Client Sustainable Investing Survey. overall European fund flows. Sustainable to meet the needs of their clients over One in five said that COVID-19 would fund assets reached a record high of the coming decades. But they also see accelerate their sustainable investing €1.3trn11. the enormous opportunity for economic allocations and nearly 9 in 10 (88%) have growth and investment returns presented placed climate-related risks at the top This trend is also reflected in the rapid by the transition to net-zero, and are of their portfolio concerns9. With this growth of exchange-traded funds (ETFs), acting accordingly. sharpening focus on climate, investors which have accounted for one-third of are asking ever more searching questions new ETF listings in London in 2021 to The 87 global asset managers who about companies’ green credentials and date. Trading in ESG ETFs has risen from are signatories to the Net Zero Asset climate transition strategies before they minimal levels in 2019 and currently Managers Initiative and are committed make their investment decisions. account for 4.8% of all trading on to net-zero emissions by 2050 or sooner, London’s markets, and they are set to are responsible for $37trn-worth of assets ESG fund flows be one of the London market’s fastest under management. The disruption caused by the pandemic growing financial instruments12. has led individual and institutional The number of signatories to the investors alike to look for more United Nations-supported Principles for sustainable and resilient business Responsible Investment (UN PRI) climbed operations, practices and products, as 29% in the space of a year, rising to more well as tools to future-proof portfolios 4 https://www.g7uk.org/wp-content/uploads/2021/06/G7-Economic-Resilience- Panel-Key-Policy-Recommendations.pdf than 3,000, with collective assets under against climate risk. This has led to 5 https://www.g7uk.org/g7-finance-ministers-agree-historic-global-tax-agreement/ 6 EU taxonomy for sustainable activities | European Commission (europa.eu) management amounting to $103trn, accelerating demand for environmental, 7 https://www.ft.com/content/f229c6fa-2a9c-4156-a52b-59a709d4ef21 8 8 https://www.unpri.org/annual-report-2020/foreword according to PRI’s 2020 Annual Report . social and governance (ESG) funds – 9 https://www.blackrock.com/corporate/newsroom/press-releases/article/corporate- one/press-releases/blackrock-survey-shows-acceleration-of-sustainable-investing a demand that has also been driven by 10Refinitiv Lipper data, cited by Reuters https://www.reuters.com/business/ sustainable-business/sustainable-fund-inflows-hit-record-high-q1- the performance of these funds, which morningstar-2021-04-30/ 11https://www.morningstar.co.uk/uk/news/211923/sustainable-fund-flows-hit-new- have outperformed their non-ESG peers record.aspx 12https://www.londonstockexchange.com/discover/news-and-insights/global- in seven out of the last ten years10. exposure-best-execution-why-london-centre-global-securities-trading Green Economy Report 2021 10 COP26: a moment – and momentum Green Economy Report 2021 COP26: a moment – and momentum 11 The global focus on the threat of climate risk to ecosystems, societies, markets and to companies will be at its sharpest at COP26, which is set to take place in Glasgow in November 2021. It is the most significant climate summit since the 2015 Paris Agreement. It is an important moment and one in which LSEG, as an organisation that is committed to playing a leading role in supporting the growing drive to a net-zero carbon economy, will participate.