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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 […]

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 October February 2006.

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.

By Stacey Higginbotham

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  1. [...] Earth2Tech notes 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.” [...]

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  2. [...] there are now more than three dozen clean technology or sustainable energy funds out there. Learn how to index you cleantech investments over at Earth2Tech. Share/Send Sphere Print Previous [...]

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  3. As the Manager of the Cleantech Index, I’d like to make a few points of clarifications:

    The Cleantech Index (CTIUS) was actually launched in February 2006, It was the first, and perhaps still the only, index to cover the broad clean technology phenomena across the broad range of industry sectors.

    With no malice intended, I certainly take exception to Mr. Wilder’s claim as being the grandaddy of all cleantech indices. Neither I, nor most other cleantech experts consider any of the Wilderhill Indices to be ‘cleantech” by any stretch of the imagination. They are, with varying degrees, energy and alternative energy indices, but certainly not cleantech, and sometimes no so clean either.

    What the Wilderhill indices do, as do a plethora of competitors, is to track the more narrow alternative energy energy sector. Given the size of the ETFs linked to Wilderhill indices, I would say Wilderhill has been very successful.

    When one takes a closer look at most indices in cleantech, alternative energy, environmental, water, and even nanotech spece, it becomes readily apparent that there are a few good indices and ETFs, and a lot of really bad ones – even ones established by some of the world’s largest financial firms. Veterans of the investment world know that product quality, integrity, and serving investors rarely get in the way of making a quick few bucks (or in this case, a few hundred million).

    I would urge any index user or investor in index-based products to spend a lot of time looking at both the index (strategy, composition, weighting scheme, etc) and the mechanics of the derivative product. They will likely be very surprised by what they see. Of course almost nobody does this, but then again, few investors looked too closely at mortgage-backed securities until it was far too late.

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  4. Green energy is definitely the best solution in most cases. Technology like solar energy, wind power, fuel cells, zaps electric vehicles, EV hybrids, etc have come so far recently. Green energy even costs way less than oil and gas in many cases.

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  5. [...] But it’s also good for private sector players to track the carbon risks associated with their investments. Merrill Lynch, who helps fund the CPD, Goldman Sachs, Morgan Stanley, AIG Investments, Barclays and HSBC are all “signatory investors” in the CPD, have access to information not publicly available. These huge investors are already dealing with carbon regulation in the European market and expect America will soon follow suit; when that happens, they’ll need baseline info on their existing investments to start gauging carbon-related risk. Many of these companies are also tracking carbon credits and cleantech indices. [...]

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