Green equities outperformed since 2008 but with volatility – report

Green equities have outperformed the FTSE All Cap by 59% since 2008, although 12-month rolling relative performance has seen large swings, according to the London Stock Exchange Group (LSEG).

Despite current market volatility, long-term drivers such as the energy transition, sustainability regulations, and adaptation investments continue to support the growth of the green economy, it said in a new report from the group.

“Green equities started 2024 underperforming their benchmark, the FTSE Global All Cap Index. However, they recovered in the second half to close the year in line with the market. Year-to-date, they have underperformed the market by 3% in challenging market conditions,” said LSEG.

The report – Investing in the green economy 2025: Navigating volatility and disruption – looks at the opportunities within the green economy, highlighting the growth of emerging areas such as climate adaptation.

According to analysts at the LSEG, investors should recognise the green economy as a large and rapidly growing sector with strong long-term fundamentals, diversified across regions and industries, offering opportunities in equities and fixed income, especially through emerging areas like climate adaptation.

Currently, the global green economy is valued at $7.9trn (€7trn) as of Q1 2025, representing 8.6% of listed equity markets, with revenues from green products and services having exceeded €4.4trn in 2024, more than doubling over the past decade, the report found.

“The market capitalisation of the green economy has expanded at a compound annual rate of 15% over the past decade, second only to the technology sector,” the report stated.

Green industries have demonstrated strong long-term performance but remain prone to short-term volatility. They tend to exhibit a positive beta to broader markets and typically outperform during market rallies but underperform in downturns, said LSEG.

Looking ahead, the group said that future opportunities in the green economy will revolve around climate adaptation and resilience, as well as the energy transition with a focus on energy management and efficiency.

Furthermore, investors should be focused on the growth in electric vehicles (EVs) and related transport equipment, as well as faster expansion in emerging markets, increased green capital expenditure, and the use of green bonds as a financing mechanism, added LSEG.

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