3 Green Investment Trends To Watch Over the Next 5 Years

3 Green Investment Trends To Watch Over the Next 5 Years

Green investing has taken centre stage in recent years, as sustainable and environmentally-conscious goals increasingly shape investment strategies worldwide. With climate change threats increasing, businesses and governments are realising the urgent need to transition to low-carbon economic models. This necessity has accelerated momentum toward renewable energy, electric mobility, carbon reduction technologies, and more.

Green investments have gained immense momentum, with global sustainable investment topping $500 billion in 2020 alone according to BloombergNEF [1]. This growth shows no signs of slowing. Beyond ethical motivations, green investments are desirable for their profit potential. Numerous studies have found a positive correlation between corporate sustainability practices and financial performance. By aligning investment strategies with environmental goals early on, investors can capitalise on the anticipated growth in green sectors while potentially mitigating risk.

With this in mind let's dive deeper into the trends shaping this landscape. 

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1.Electrification and Advanced Battery Technologies: 

Electric Vehicles

The global auto industry is rapidly shifting away from traditional gas-powered internal combustion engines toward electric vehicles (EVs). With battery costs falling 89% over the last decade (BloombergNEF, 2021)[2] and countries around the world setting aggressive emission reductions targets, EVs are poised to dominate the future of transportation. 

As awareness around environmental concerns grows, consumer preference is shifting towards electric mobility. Automakers are investing billions to electrify their cars, with companies like Volvo and GM committing to exclusively electric lineups by 2030-35. Governments worldwide are tightening their emissions. The EU is aiming for a 55% reduction in greenhouse gas emissions by 2030 (European Commision, 2023)[3], indirectly pushing automakers towards EVs. Given these factors, BloombergNEF projects EVs will account for 58% of global passenger vehicle sales by 2040 [4].

Advanced Battery Technologies

Advances in battery storage technology are critical to enable the transition to renewable energy. As solar and wind supply larger shares of electricity generation, energy storage allows captured energy storage to be dispatched when needed. The global energy storage market is forecast to grow sixfold from 2020 to 2030 [5]. 

Key areas of battery innovation include solid-state batteries that promise increased safety, energy density, and affordability. As research progresses, alternative battery chemistries like sodium-ion and magnesium-ion are emerging. These alternatives may provide environmental benefits and address lithium’s scarcity concerns. Continued declines in battery costs will allow energy storage to play an expanding role in grid balancing and reliability. With great room for improvement, batteries represent an immense investment opportunity.

2.The Renewable Energy Revolution

The spotlight on renewable energy has never been brighter. Wind and solar power have become a key focus in global energy markets, experiencing exponential growth rates in installations and capacity. There are a few driving factors:

• Cost Competitiveness: Renewable technologies were seen as expensive alternatives, now they have become increasingly cost-competitive. For instance, solar PV module prices have dropped around 89% over the last decade (OurWorldData, 2020)[6]. 
• Emerging Markets: Countries like India, China and Brazil are quickly becoming renewable energy powerhouses. Their commitment to reducing carbon footprints and improving energy access is paving the way for many solar and wind farms.
• Government Incentives: Around the world, governments are offering incentives, subsidies, and tax breaks to accelerate the deployment of these green technologies 

Hydroelectricity: 

Hydropower has long been a major renewable electricity source globally, providing over 17% of the world's supply (IEA, 2021) [7]. While growth has slowed in recent years, hydropower still holds potential through technical innovations and regional expansion

• Technical Advancements: Solutions like adding generating capacity to existing dams and low-head turbine designs are unlocking new hydropower capabilities. Variable speed turbines can also enable greater grid flexibility.‍
• Economic Benefits: Hydropower delivers affordable, reliable electricity and offers energy storage capabilities. Developing nations are still tapping their hydro potential, with countries like India planning major new projects. Strengthening hydro industries creates local jobs and economic activity.

Bioenergy and Geothermal:

While solar and wind dominate headlines, other renewable sources like bioenergy and geothermal play essential roles in decarbonisation efforts.

Modern bioenergy, derived from plant materials and residues, accounts for 50% of renewable energy consumption globally (IEA, 2023) [8]. Sustainable bioenergy offers reliability by providing uninterrupted baseload power, unlike the random nature of solar and wind.

Geothermal energy has immense potential, with only a small fraction harnessed currently. Installed geothermal capacity is expected to grow 56% from 2020 to 2026 (IEA) [9]. Tapping into the Earth’s heat, geothermal power stations offer a clean and consistent power source. With advancements in drilling technologies, their potential is only expected to grow.

Grid Modernisation

Outdated grid infrastructure struggles to integrate rising renewable energy levels. Smart grid technologies like advanced metering infrastructure, battery storage, and dynamic load management are critical for stability. 

Governments are investing in modernisation efforts, the U.S. Department of Energy has introduced $13 billion in grid resilience programs (EnergyGov, 2022) [10]. Upgrading infrastructure will enable grids to incorporate renewables while improving security and resilience.

3. Carbon Management: From Capture to Commerce:

Carbon Capture, Utilisation and Storage (CCUS):

In our ongoing mission to mitigate climate change, CCUS has emerged as a pivotal solution. As industries strive to achieve carbon-neutral or even carbon-negative operations, capturing and effectively using or storing carbon dioxide (CO2) is of great importance.

While renewable energy adoption is critical, certain carbon-intensive sectors cannot eliminate emissions entirely with current technologies. CCUS serves as an essential tool to capture these hard-to-abate emissions across industries like heavy manufacturing and aviation. As emission-reduction goals grow more ambitious, global investment in CCUS infrastructure and capture technology development is rapidly increasing. Stricter climate targets from governments and corporations will further accelerate CCUS deployment and innovation.

The rise of Carbon Markets and Offset projections: 

The concept of carbon trading isn’t new, but the market’s evolution and sophistication have been noteworthy. 

As companies worldwide aim to offset their emissions, the demand for credible carbon credits has skyrocketed. This push is not only from regulatory pressures but also from an increasing recognition of corporate responsibility towards the environment (WorldBank, 2022) [11].

With concerns over the credibility of carbon offset projects, technology has stepped in to ensure transparency and verifiability. Blockchain, in particular, has seen growing applications in this sector. By providing a transparent tamper-proof ledger, blockchain technology can track carbon credit transactions, ensuring that credits are neither double counted nor falsely claimed (NetZero, 2023) [12]. 

How could you invest in these trends?

There are several avenues for investors to capitalise on these green technology trends. 

1. Stocks in Leading Companies: One of the most direct ways to invest is to buy stocks in companies at the forefront of these green trends. From energy producers harnessing the power of wind, solar, and geothermal, to automakers electrifying their vehicle lineups, there's a wide range of companies playing pivotal roles in this green revolution.‍
2. Bonds for Sustainable Projects: Green bonds, specifically designed to fund projects with environmental benefits, have seen exponential growth. Investing in bonds issued by companies or governments for green projects can be both profitable and environmentally impactful.
3. Component Manufacturers: Beyond the flagship companies, there's an ecosystem of manufacturers producing essential components, whether it's for EV batteries or wind turbine blades. Investing in these 'background' players can offer significant returns, especially as demand for their components rises.
4. Tokenised Green Projects: With the rise of blockchain technology, tokenised assets related to green projects are emerging. These digital tokens can represent a share in a renewable energy project, for instance, allowing investors to directly fund and benefit from green innovations.

As the world steers towards a sustainable future, aligning your investment strategies with these trends isn't just an opportunity; it's about future-proofing your portfolio while supporting the movement towards sustainability. 

Based on the immense potential of green investing, moreliquid has chosen to tokenise their first asset in the sustainable energy sector. Our first asset is royally special. If you want to stay up to date with our tokenised launches, subscribe to our newsletter here.

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References:

[1] BloombergNEF (2021). Energy Transition Investment Hit $500 Billion in 2020 – For First Time. [online] BloombergNEF. Available at: https://about.bnef.com/blog/energy-transition-investment-hit-500-billion-in-2020-for-first-time/#:~:text=London%20and%20New%20York%2C%20 January. 

[2] Henze, V. (2021). Battery Pack Prices Fall to an Average of $132/kWh, But Rising Commodity Prices Start to Bite. [online] BloombergNEF. Available at: https://about.bnef.com/blog/battery-pack-prices-fall-to-an-average-of-132-kwh-but-rising-commodity-prices-start-to-bite/. 

[3]European Commission (2023). A European Green Deal. [online] European Commission. Available at: https://commission.europa.eu/strategy-and-policy/priorities-2019-2024/european-green-deal_en. 

[4]BloombergNEF (2020). Electric Vehicle Sales to Fall 18% in 2020 but Long-term Prospects Remain Undimmed. [online] BloombergNEF. Available at: https://about.bnef.com/blog/electric-vehicle-sales-to-fall-18-in-2020-but-long-term-prospects-remain-undimmed/#:~:text=The%20 latest%20annual%20 Long%2DTerm. 

[5] Newsroom, E. (2021). BNEF: Global battery storage capacity to grow 20 times over by 2030 - edie. [online] https://www.edie.net/. Available at: https://www.edie.net/bnef-global-battery-storage-capacity-to-grow-20-times-over-by-2030/#:~:text=%E2%80%9CThis%20is%20the%20 energy%20 storage. 

[6] Roser, M. (2020). Why did renewables become so cheap so fast? [online] Our World in Data. Available at: https://ourworldindata.org/cheap-renewables-growth. 

[7] IEA (2021). Executive summary – Hydropower Special Market Report – Analysis. [online] IEA. Available at: https://www.iea.org/reports/hydropower-special-market-report/executive-summary. 

[8] International Energy Agency (2023). Renewables - Energy System. [online] IEA. Available at: https://www.iea.org/energy-system/renewables. 

[9] International Energy Agency (2021). Renewables 2021. [online] Available at: https://iea.blob.core.windows.net/assets/5ae32253-7409-4f9a-a91d-1493ffb9777a/Renewables2021-Analysisandforecastto2026.pdf.

[10] Energy.Gov (2022). Biden-Harris Administration Announces $13 Billion To Modernize And Expand America’s Power Grid. [online] Energy.gov. Available at: https://www.energy.gov/articles/biden-harris-administration-announces-13-billion-modernize-and-expand-americas-power-grid.  

[11] WorldBank (2022). Business Enabling Environment. [online] www.worldbank.org. Available at: https://www.worldbank.org/content/dam/doingBusiness/pdf/BEE%20Concept%20Note_December%202022.pdf. 

[12] Net Zero Think (2023) https://www.linkedin.com/pulse/blockchain-technology-potential-solution-address-carbon/ 

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