As the world’s economic landscape continues to evolve, the green economy has emerged as a force to be reckoned with. Over the past decade, revenue from green products and services has more than doubled, and if the green economy were considered its own sector, it would already account for nearly nine percent of the global stock market capitalization. According to Johanna Kull, Sustainability Manager at DNB Carnegie Private Banking, this growth reflects an undeniable shift in the global investment narrative, particularly as it relates to sustainability.
In an exclusive interview with Dagens PS, Kull shed light on how green investments have overcome their initial scepticism, revealing a more robust and strategic approach to sustainability. “If there was previously a lot of focus on talk, it has now shifted to the workshop,” Kull explains, referencing the evolution of green investments from a trend-driven conversation to a serious, workshop-driven strategy.
The Green Shift: From Hype to Substance
The investment community’s early enthusiasm for climate and sustainability investments, which peaked around 2021, has somewhat cooled in recent years. However, as Kull notes, the focus has now moved beyond superficial promises and rhetoric. The sector has matured, with investors placing greater emphasis on tangible results and long-term viability.
Globally, institutional investors are aligning with this shift. A recent survey from Franklin Templeton revealed that a staggering 86 percent of large asset managers plan to increase their exposure to sustainable investment strategies in the coming years. This growing confidence in the green economy marks a significant departure from the initial cautious approach that prevailed in earlier years.
Green Economy: Larger Than You Think
In fact, if the green economy were classified as a standalone sector, it would already represent approximately 8.6 percent of global market capitalization—placing it as the fourth-largest sector in the world, ahead of banking and finance.
Despite this impressive size, the green economy’s presence remains relatively hidden in mainstream indices like MSCI World or FTSE All-Cap. This is largely because green companies are often dispersed across various industries, rather than being consolidated into a singular “green” category. As a result, sustainability-focused funds tend to include both traditional and green investments, making it difficult for investors to see the full extent of green assets in their portfolios.
Repositioning: A Strategic Pivot
For private savers, the story of green investments has been a mixed one. Historically, green investments have underperformed relative to broader index exposure. However, the tide is slowly turning. Kull highlights that investments in renewable energy are increasing globally, even in markets like the United States, where political challenges to climate initiatives persist.
In parallel, the broader landscape of sustainability investments is becoming more integrated into traditional portfolio strategies. Analysts from firms like Morningstar and Sustainalytics forecast that climate change, the energy transition, and biodiversity will remain prominent themes for investment through 2026 and beyond. These factors are no longer niche concerns; they are now critical pillars of risk management and growth potential for investors seeking long-term stability.
As the green economy continues to grow, its integration into portfolio strategies will likely intensify. More and more, investors are considering sustainability not just as a trend, but as a core component of their risk management frameworks and future-proofing strategies.
Looking Ahead: Green Investments as a New Standard
The next phase for green investments will be a convergence of sustainability with financial performance metrics. As green companies become more entrenched in traditional markets, the debate around ESG (Environmental, Social, and Governance) investing will evolve further. More transparency and rigorous data will help investors distinguish between genuine sustainability leaders and those simply capitalizing on green trends.
For investors and portfolio managers, the task now is to evaluate the true impact of these green companies. This goes beyond their environmental credentials—it includes assessing their ability to scale, innovate, and remain resilient in a rapidly changing economic environment.
In our next issue of the Nordic Business Journal, we will take a closer look at the integration of sustainable investing into broader portfolio management strategies. We will explore the tools investors need to accurately assess the true impact of their green investments, and how new technologies are enabling more precise ESG assessments. Don’t miss out on how you can position your portfolio for the future of sustainable growth.
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