Green Finance is no longer a fad but where the world is going. It's where regulators, customers and investors are going. Assets in investment funds focused on environment reached $2 trillion in Q1 2021, more than tripling in 3 years. More than $5 billion of bonds and loans meant to fund green initiatives are now issued every day. The two largest US banks have pledged $4 trillion in climate-oriented financing over the next decade. Since 2019, $473 billion has flowed into mutual funds and ETFs with environmental goals, while $103 billion has gone into all other stock funds.
The charge is lead by surging valuations for companies like electric-car maker, Tesla, worth more than half a trillion dollars, and has convinced investors that the green revolution is here to stay and they can also make money by getting behind it. In a more recent example, alternative milk provider, Oatly IPO'd at a valuation of more than $10 billion, giving early investors a huge pay day.
On the other hand, spending on oil & gas extraction is on its way down. In 2014, the figure was $735 billion and stood at less than half of that last year. Spending on wind and solar projects meanwhile rose from $135 billion in 2014 to $220 billion in 2020. Spending on renewable energy is expected to surpass oil & gas over the next few years.
Short Squeez Takeaway: About $50 trillion in investment is needed to reduce greenhouse gas emissions by 2050 to meet the Paris climate accord goal of getting to net zero emissions and limiting the rise in average global temperatures to 1.5 degrees Celsius above pre-industrial levels. We still have a long way to go but as some climate change effects become more tangible around us (that could end up costing way more than the preventative measures) more money will pour into green initiatives to save the planet.