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European Green Investments Market - Investment Analysis
Frost & Sullivan, April 2008, Pages: 57
Demand for Green Products and Technologies Driving up Green Investment
Faced with global warming and unpredictable world climate, governments and environmental organisations are actively working to raise environmental awareness among the masses and are encouraging them to go green. At the same time, every organisation wants to invest in green products and benefit out of the green wave. Huge investments are being made in green product and technology development in areas of alternate energy systems, environmental building technologies and so on. This has led to financial engineering in this space and the advent of green financial products such as carbon credits, green/sustainable mortgage-backed securities, green hedge funds and social responsibility investment funds.
However, the surfeit of money flowing into the green investment (GI) market has driven up the valuations of the stocks of certain companies that are into green business and investments. There is a risk of this resulting into a green bubble burst, which can severely affect the green investment funds. "Furthermore, GI funds are relatively new entrants in the asset management industry," notes the analyst of this research service. "Shortage of GI funds and limited coverage may be the biggest restraint for the growth of the GI market."
Regulations Favouring Environment-Friendly Companies
Governments are offering subsidies and tax relief and encouraging companies to go green. Carbon credit system is the most notable of them. In the future, one can expect governments laying down strict environmental standards, which need to be met by all companies. Today, many of the green energy companies are able to make profits because of government subsidies. Additionally, pension funds are directing their money towards investments that are socially responsible. A regulation is expected soon wherein pension funds have to invest at least a proportion of their assets in social responsibility investments. This is expected to further propel the growth of the GI market.
Overall, it is estimated that the European GI market grew by about 20 per cent from 150 billion euros in 2006 to 180.4 billion euros in 2007. It is further estimated that by 2014, the market will grow at a compound annual growth rate (CAGR) of 18.0 per cent to reach 572.9 billion euros. "Equity funds are expected to be highest growing segment with a CAGR of 18.6 per cent, followed by balanced funds with a growth of 16.8 per cent, during the forecast period," says the analyst. "The growth will be a result of both organic asset growth and addition of new funds in the industry."
Frost & Sullivan's Business and Financial Services Group serves clients around the world in all aspects of financial analysis, market research and monitoring, due diligence, idea generation, opportunity analysis, investment valuation, and other proprietary research. A key aspect of this offering is the Financial Benchmarking and Analysis (FBA) service, including this research service that provides a comprehensive financial analysis of companies in the European Green Investment Market.
-1 EXECUTIVE SUMMARY
-2 INTRODUCTION AND METHODOLOGY
--Introduction and Methodology
---Introduction and Methodology
-3 MARKET OVERVIEW
--Market Drivers and Restraints
--Market Forecasts and Trends
---Trends by Region
-4 INVESTMENT ANALYSIS
---Frost & Sullivan Growth Monitor
--Emerging Investment Opportunites
---Green Exchange Traded Funds
---Green Hedge Funds