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March 15, 2007
S&P Tracks Sustainability With a New Global Index
by Anne Moore Odell
S&P jumps into the growing pool of sustainability indexes with the launch of its Global Thematic
Index Series.
SocialFunds.com --
At the end of February, Standard and Poor’s (S&P) announced the launch of its Global Thematic
Index Series. The Series is composed of three indices: the S&P Global Clean Energy Index, the S&P
Global Water Index and the S&P Global Infrastructure Index.
 This new index series joins S&P’s well-known
family of indices that include the S&P 500 and the S&P Global 1200. The S&P 500 has $1.26 trillion
invested and $4.45 trillion benchmarked.
"We saw the emergence of new investment themes
such as clean energy, water and infrastructure in the industry. These themes did not fit into
traditional ways of creating indexes based on geography or industry. These themes are truly global,
and may span across multiple industries," said S&P Index Strategist Srikant Dash.
"We had
interest from product issuers to license such indexes from S&P. Based on this combination of where
we saw the investment community was heading and where our clients wanted us to be, we decided to
create this new series," Dash continued.
As the name suggests, the S&P Global Thematic
Index Series consists of publicly listed companies from around the world. The series steers away
from traditional geographical and industry classifications, looking to diversify company selection
by following specific criteria for each index. Pure representation to each investment theme, high
liquidity and tradability were named by Dash as the three most important criteria for inclusion on
the new index series.
The S&P Global Clean Energy Index measures the performance of 30
companies that focus on clean energy production, clean energy technology, and energy equipment. The
Clean Energy Index excludes companies for which their involvement with clean energy is a small part
of their overall business. The US firm MEMC Electronic Materials, maker of silicon wafers for the
semi-conductor industry, is the index’s largest constituent at 6.35%.
The S&P Global
Water Index gauges 50 companies: 25 water utilities and infrastructure companies and 25 water
equipment and material companies. French company Veolia Environment has the biggest share of this
index at 9.57%.
The S&P Global Infrastructure Index measures the performance of 75
companies that run utilities, pipelines, airports, ports and highways. Twenty-two countries are
counted in this index, with Spanish company Abertis Infraestructuras, S.A. being the largest
constituent at 4.71%
S&P is not alone in tracking the markets of clean energy, water and
infrastructure. Another global sustainability benchmark is the WilderHill Clean Energy Global
Innovation Index, which was launched in 2006 by New Energy Finance in a partnership with
Wildershares. The KLD Global Climate 100SM Index and Ardour Global Indices are other well-known
indexes that follow clean energy. The Palisade Water Index, published by the American Stock
Exchange, follows the global water industry. The Macquarie Global Infrastructure Index series,
produced by FTSE, tracks companies in the infrastructure industry.
On a broader level, in
1999 the Dow Jones Sustainability Indexes became the first indexes to track the global performance
of companies that focus on sustainability. These indexes look at companies across 58 sectors.
Alexander Barkawi, Managing Director, of the SAM Indexestold Socialfunds.com some of the reasons
why he thinks there is a growth in renewable and sustainability indexes: "Investments into
individual sustainability themes — particularly renewable energy and water — have indeed been on
the rise over the last 12 months. The growing recognition among retail and institutional investors
that the challenges of climate change and water scarcity also have significant impacts on their
investments is obviously driving this
momentum."
"The global markets for solar, wind,
biofuels, and fuel cells now exceed $50 billion annually," said Ron Pernick, Principal, Clean Edge Inc. and co-developer of the NASDAQ
Clean Edge U.S. Index. "It's only natural that others are developing indexes to track this growing
and dynamic sector. We're seeing compounded annual growth rates for a number of clean-energy
sectors in the 30+ percent range," he explained. This index tracks pure-play clean energy
companies.
"A confluence of forces, from volatile conventional energy prices to the
growing mainstream acceptance of climate and carbon issues, are putting clean energy increasingly
on the corporate, investment, and political map," Pernick added.
©
SRI World Group, Inc. All Rights Reserved.
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