How Can the World’s First Green Public Contracts Database Benefit the Investment Community, Private Businesses and Governments at the Same Time?
Over 40% of all public procurement contracts published in the EU since 2010 can be considered green. This is a staggering amount that clearly demonstrates the extent to which the protection of the environment has permeated the considerations of public authorities in Europe.
More importantly, this figure signals the multitude of opportunities that exist for companies and investors alike to tap into the green procurement market, which is set to grow even bigger, especially given the EU’s ambition to become the first climate-neutral continent by 2050.
Surprisingly or not, the US appears to be trailing behind Europe, with just under 15% of federal contracts that can be labeled green. It has to be noted though that, as the criteria set by the European Commission on the one hand and three US agencies (the Environmental Protection Agency, the Department of Energy, and the Department of Agriculture) on the other, differ from each other, these and the figures that follow need to be taken with a pinch of salt.
Still, they provide handy insight into the role green public procurement plays across some of the world’s largest economies.
But where does such valuable business intelligence come from?
Utilizing a host of official government sources to gather raw data that is then processed by our in-house team of developers, TenderAlpha has created a working solution to detect green public procurement contracts on a global scale capturing tender information from 2010 onwards.
According to our data, 43.8% of the 1.5 million contracts in the EU are green. In terms of procurement value, this amounts to USD 1.9 trillion out of USD 5 trillion, which equals 38%.
With regards to the US, out of the 53 million contracts that TenderAlpha has tracked since 2010, 7.7 million fall under the green category. This amounts to 14.5% of all contracts. From a value perspective, TenderAlpha.com estimates that green tenders have a combined value of USD 1.2 trillion out of a total procurement value of USD 5.3 trillion for all contracts, or 22.6%.
Figure 1: Share of green contracts in the EU and the US, 2010-2020 (by total procurement value)
Figure 2: Share of green contracts in the EU and the US, 2010-2020 (by total number of contracts)
Where Does TenderAlpha Get Its Data From?
Green procurement criteria in EU countries, as well as specific legislation and environmental purchasing from the US, have been used to set the basis for the methodology. It is applied to the entire global procurement data feed, in order to create the world’s only live green procurement contracts database with 10+ years of historical records.
What Value Does Green Public Procurement Data Add?
No other alternative data provider has the niche capability to provide public procurement data for government tenders that contain explicit green elements in their documentation. Therefore, any company willing to participate in government works that take the wellbeing of the environment into account can gain access to a database of contracts specific to its strengths.
Investors can also benefit from such clean and precise information. Learning which companies specialize in and win a lot of green contracts can support their comprehensive business analyses, pointing out enterprises that are already thriving in the fast-growing setting of green procurement.
In addition to understanding more about the most successful players in GPP, investors can also use the data provided by TenderAlpha to paint a more holistic picture of a particular industry market or country.
Monitoring this type of data enables investors to build a valuable knowledge of the industries that are advancing more rapidly with regards to their environmental considerations. Similarly, there exists the opportunity to gain insight into how the uptake of GPP varies across countries. This indicator is particularly helpful when comparing the state of green public procurement in the EU.
Data about environmentally-friendly contracts and companies add extra value in light of the changing demographics of investors. The increasing number of millennials joining the investment community means that there is more emphasis on ethical investment.
A recent study by Morgan Stanely revealed that nearly 90% of millennial investors were interested in pursuing investments that more closely reflect the values they hold. Moreover, 2020 saw a doubling of the money invested in ESG funds compared to the previous year. According to Morningstar, funds operating on ESG principles captured USD 51 billion of net new money from investors - a dramatic surge from the USD 21 billion in 2019.
That being said, ESG investing as a whole is poised to grow in the coming years and its environmental aspect will play a central role in the process.
Another key reason why information about green public contracts and who wins them could be so valuable for investors is because GPP results are fairly easy to monitor. All the relevant data is published by official government sources, so there can be little doubt about its veracity. That makes a company’s success in the GPP market measurable. From this follows that its activities could be taken as an objective factor for its ESG rating - a rarity given the general lack of clarity over what is considered a truly ESG-friendly practice.
Assessing the Governments’ Efforts to Green the Economy
Similarly to tracking which companies excel in their green activities, TenderAlpha’s database of green contracts allows for monitoring the governments’ commitment to transforming the economy into a more sustainable one.
Both the EU and the US have clearly stated their ambition to become climate-neutral by 2050. Achieving this goal inevitably encompasses the greening of the public procurement process in each country. Elaborating on the EU Green Deal in February 2020, Frans Timmermans - Executive Vice-President of the European Commission - stressed its goal to transform the way the EU produces its products, in order to make them more sustainable and affordable, which directly relates to the necessity of setting clear green procurement criteria.
Noting that, the intelligence provided by TenderAlpha can shed light on the progress different regions are making with regards to the adoption of green criteria.
Furthermore, identifying the countries (and sectors, for that matter) that perform best and worst enables policymakers to shape their future policies in accordance with real market figures. Being able to assess each industry’s actual impact on the economy could be a major tool in determining the next steps that need to be taken to achieve the climate neutrality goals set by the EU and the US.
The GPP data generated by TenderAlpha has the potential to serve various stakeholders, as it contains the answers to many of the questions institutional investors, private companies, and governments alike may have.
It is also of utmost importance to clarify that the methodology created by TenderAlpha is dynamic and very much a work in progress. As GPP becomes a more significant topic in the financial sector, it can be expected that not only there will be more green tenders published in wider geographies, but the extraction of useful data will also become easier.
We will keep you updated on the refinements of the methodology and will publish more analyses based on our data, including a breakdown of the share of green contracts per sector and by country. In the meantime, get in touch to find out more about our services and/or to request a demo.