Green billionaires: can purposeful wealth save the planet?
Green technologies have been growing exponentially around the globe in response to rising awareness of our planet’s environmental challenges. And that growth has brought rewards to pioneers in sustainable technologies such as electric vehicles or renewable energy.
According to Forbes magazine, there are now 34 so-called ‘green billionaires1’ worldwide, and 19 new people have joined their ranks in the last year alone2. They are defined as those who have made their wealth by providing solutions to climate change, or other environmental issues.
The rate of green wealth creation is accelerating too – Bloomberg reports the combined net worth of the top 15 green billionaires in 2021 hit $500 billion3, up from just $61 billion at the end of 20194.
Fortunes are clearly being made. But are these billionaires riding the current wave, or is a longer-term trend emerging?
Profiting from the green transition
The growth of climate-related wealth is showing no sign of slowing thanks to growing political and corporate momentum. At the recent COP 26 in Glasgow, global leaders and businesses affirmed net zero commitments, while pledges for lending and investment from financial services firms rose to $130 trillion5.
Former Bank of England governor Mark Carney said the transition to net zero economy presents "the greatest commercial opportunity of our time".6
The scope of this potential has not escaped the notice of investors either. A Barclays-supported report found that the adoption of impact investing is growing at a phenomenal pace. Since 2019 the proportion of portfolio allocations to sustainable investing has jumped from 20% to a predicted 47% this year7.
Yet while climate change is a global challenge, most green billionaires currently reside in just two nations – the US and China8. There is potentially some irony in the fact that these countries are currently the world’s biggest carbon emitters. But it could be argued that the sheer scale of their climate issues provides the impetus to seek solutions. And in the last year, both nations have significantly stepped up their funding of net zero initiatives, implying more green billionaires could emerge in these nations during the next decade.
However, the tide of capital being targeted at green initiatives is not solely tied to the world’s two biggest economies. Fortunes will inevitably be made elsewhere. In fact, very few countries, businesses or sectors will be untouched by the upcoming changes and many industries will need to be completely reinvented.
Where did the green billions come from?
These green trailblazers, innovators and entrepreneurs have made their fortunes from scaling up clean-energy solutions to bring them to a much wider audience.
The list of green billionaires includes electric vehicle manufacturers, as well as those supplying component parts such as batteries.
Manufacturers of renewable energy sources – notably solar – are also part of this cohort, benefitting from supportive government policies, particularly in China.
Arguably, the current crop of billionaires has focused on sectors that were further along the transition curve and have benefitted from existing technologies.
Yet, many industries still need to be transformed – such as cement and steel production, and heavy transportation (road haulage, shipping and air travel), agriculture, and buildings.
“Given the scale of these global markets, fortunes can still be made in sectors where these green billionaires operate,” notes Damian Payiatakis, Head of Sustainable and Impact Investing, at Barclays Private Bank.
“At the same time, companies that have proven their technologies over the last few years, but need capital to scale will be a risker, but potentially more attractive investment. Additionally, canny investors will look at sectors that occupy critical, but perhaps less fashionable parts of the value chain such as energy storage. They will also look at where less capital has historically been invested, for example the ocean economy or greening buildings. Over the next ten years, we should expect the number of green billionaires to grow and stem from a much wider range of sectors and nations.”
The early bird catches the worm
Many of the technology and solutions needed to reinvent these industries are still in their infancy or at the lab-testing stage. Private funding can help accelerate their development and many canny investors have already spotted this opportunity.
In fact, some green billionaires grew their wealth by providing much-needed early funding to sustainable business start-ups.
For those of us more focused on supporting innovation and entrepreneurialism, early-stage private investment could be an exciting and potentially lucrative way to participate in the green transition and help pave the way for a more sustainable future.
The scope for investing in early-stage climate venture funding is growing. In 2013 it amounted to just $418 million but jumped 3,750% to reach $16.1 billion in 20199. And this is a mere fraction of what is needed to achieve net zero goals.
Not all green is gold
While the potential for investments to make a positive contribution and affect real change is enticing, it’s important to acknowledge that not all green investments will turn into gold.
Investing in new or unproven technologies can be risky and some sustainable success stories still have the potential to disappoint as valuations can be built on a combination of hype and hope rather than fundamentals.
And we don’t yet know who the ultimate winners of these new technologies will be. The electric car manufacturers of today may not be responsible for the cars we are driving tomorrow. Will we even own cars or will a new, even more innovative, proposition emerge to disrupt the disrupters?
While we don’t have a crystal ball to reveal the future, we do know that the world is transforming quickly, and by necessity, meaning fortunes will be lost as quickly as they are made.
In less than two years, this list of green billionaires has already changed significantly. Not only have new names been added, but others have clearly fallen from favour.
Damian Payiatakis stresses the importance of considering all sides of the sustainable investment equation. He says, “Much of the green wealth is on paper and subject to rapid market swings. For investors, understanding the technicalities behind new technologies can help sift out the real opportunities from the opportunists.”
The future is greener
Sizeable fortunes may have already been made from climate solutions, but we are still only at the start of the journey. The coming decade will see the corporate world, the built environment, and the natural world transformed.
Ignoring this opportunity is no longer really an option – there’s an urgent need to deploy private capital and innovation at some of humanity’s biggest challenges. And as we’re increasingly seeing, the chance to influence a brighter tomorrow can also present financial returns.
For further information about using investments to influence a brighter tomorrow, please speak to your Private Banker.
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