With the launch of the FTSE ET50 Index, which is devoted to following 50 large cleantech stocks from around the globe, Wall Street has gone from spotting a trend to beating it to death with specialized financial products. There are now more than three dozen clean technology or sustainable energy funds, and many of them contain companies that overlap.
Last March, in a nod to the cleantech movement’s popularity among investors, Standard & Poor’s created several indexes related to clean technology. The goal, according to an S&P spokesperson, was to create transparency and a benchmark for investors interested in putting money into exchange-traded funds or individual clean energy stocks. (S&P licenses its indexes to fund companies, but does not manage any funds.)
Robert Wilder, creator of the WilderHill Clean Energy Index (which he says is called the “granddaddy of the clean tech indexes”), may be to blame. He and co-founder Josh Landess started investing clients’ money in clean technology stocks in the late 90s, only to see much of the value wiped out in the market crash of 2000. After realizing that not all of the cleantech companies lost value, he created his first index, and then convinced fund company PowerShares to create a fund around it.
Now several organizations, such as The Cleantech Network and Clean Edge, have their own indexes as well, which they have licensed out to fund companies in exchange for a percentage of the money under management in them. Other well-known indexes include the four that make up the Dow Jones Sustainability Indexes, which was created in 1999; the NASDAQ Clean Edge U.S. Indexes that were created in 2006; and the Cleantech Index that was launched in
As the market for index funds gets more crowded, financial folks are getting more creative. Merrill Lynch launched its Energy Efficiency Index; it includes companies focused on energy efficiency. Barclays Capital launched the Capital Global Carbon Index to track carbon credits and the carbon emissions market. Wilder took a different tack and launched the WilderHill Progressive Energy Index, which is comprised of old-line fuel companies that can make an impact by improving their sustainable practices. He’s also convinced that in the coming year or two, some of the indexes will have to consolidate, or else will fail to draw in enough capital and be forced to fold.
Aside from index funds, which passively track a basket of pre-selected stocks, there are also a slew of actively managed green mutual funds that have launched in the last year. Winslow Management has two, including a newly launched Winslow Green Solutions Fund created in November 2007, and its Winslow’s Green Growth Fund, which began in 2001. Socially responsible mutual fund company Calvert launched its Global Alternative Energy Fund in May 2007.
With all of the choices out there for retail investors, it’s comforting to know that as venture firms shove even more cash into clean technology companies, those of us with shallower pockets can join in, too.