Growing Interest in the Climate Change Dividend

A two-year old Climate Change Market Index developed by HSBC in Britain is getting attention from at least one of the biggest pension fund investors on this side of the pond, signaling to US-based manufacturers that positioning themselves to take advantage of a green economy is a good bet going forward.

Investors will increasingly seek companies making climate change-related products, Kevin Bourne, managing director of equities in HSBC's global banking and markets unit, told about 100 attendees at the Sustainable Manufacturing Summit in Chicago last week.

"It doesn't matter if investors believe in climate change or not, they know it's a good investment category," he said. "But investors are global and if they can't find your company, they can't lend their money to you. The tough question is how to let investors know that you’re involved in climate change."

As an example, Bourne pointed to a bicycle manufacturer in Asia that was categorised as a leisure company, but saw its revenues grow by 30 per cent last year because of sudden increased demand for an electric bike it makes for people who want to reduce their carbon footprint. The company might have been off the radar screen for investors seeking green investments if HSBC hadn't identified it and placed it within the energy efficiency and energy management sector of its climate change index, he explained.

"The big pension funds are beginning to invest in climate change and that will inspire more growth in this sector," Bourne said. Some 1,200 publicly-traded companies based in 38 countries are listed on HSBC's climate change index, but he estimated there are at least 23,000 privately-owned businesses worldwide engaged in climate change-related goods and services. They are excluded from the listing because it's difficult to get reliable financial information from private entities, he said.

So what to do if your business isn't publicly-traded and can't get a spot on HSBC's climate change index or other high-profile listings? Such companies should look to local groups, such as their city or region's chamber of commerce, to promote themselves, Bourne suggested. He believes it's also up to the US Department of Commerce, as well as state and municipal entities, to get the word out to global investors about US-based companies that are positioned to be winners in the growing worldwide green economy.

The sector has enjoyed tremendous growth in recent years. Manufacturers of climate change-related products represented about four per cent of global market capitalisation as of last December, according to data compiled by HSBC. That's up from only 2.5 per cent two years ago, Bourne said.

"A lot of that growth is happening because American CEOs decided five years ago to begin investing in this stuff," he noted. "Many people think Europe is much further along in developing products to mitigate the effects of climate change, but the US has secretly been catching up. The British love to subscribe to conspiracy theories."

Indeed, US and Canadian companies represent 33 per cent of those listed on HSBC's climate change index, up from 23 per cent in the last 12 months.

There was much debate at the conference among speakers about whether the green business sector is undergoing a thoughtful, slow-paced evolution or a full-blown, fast-paced revolution.

Anne Kelly, director of governance for Ceres, a Boston-based coalition of investors, environmental organisations and other public interest groups, believes the growth is more evolutionary. She challenged companies to make thoughtful changes and do it right the first time so they don't mess things up for the next generation.

Howard A. Learner, executive director of Chicago's Environmental Law & Policy Center and President Barack Obama's chief climate change advisor during the presidential election campaign, was fervent that a green revolution is underway. "People are either getting on board for the ride or they're running fast to catch it," he says. "The pace of change with clean energy development, wind power and other new technologies is all happening very fast."

HSBC's Bourne leans toward the argument for a revolution in the climate change business sector. From conversations he has with financiers gaining interest in climate change investments, he believes US-based manufacturers are well positioned to benefit from the funds that will flow into the green economy in the years ahead.

"We work with people who have some of the biggest lumps of cash to invest in the world," the British banker quipped, "and the US does do revolution well".

Judith Nemes is a Chicago-based freelance writer and adjunct journalism professor at Columbia College Chicago

This article first appeared at Greenbiz.com