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December 29, 2006
Launch of Three New Clean Tech Indexes
Culminates Banner Year for Green Investing
by Bill Baue
The three Jefferies Global Clean
Technology Indexes join the half-dozen green indexes introduced this
year.
SocialFunds.com -- Capping off the "year of green
investing" that saw a doubling in the number of green indexes (adding
six to the existing five launched since August 2004), New York
City-based investment bank Jefferies
introduced three new green indexes last week. The Jefferies Global Clean
Technology Composite Index (JGCTC)
and two sub-indexes--on clean tech energy generation (JGCTEG)
and clean tech energy storage (JGCTES)--track
small- and mid-cap companies that derive at least half of their revenues
from clean tech.
"As investor interest in clean technology and energy continues to
grow, Jefferies has developed a series of exclusive indexes to enable
our institutional customers to evaluate these sectors and their related
investments," said Ross Stevens, co-head of equity products at
Jefferies. "While related cleantech and energy indexes exist in the
market today, we carefully analyzed what is currently available in our
development of a distinctive offering that provides a level of breadth
and depth notable on Wall Street."
The primary factor distinguishing the Jefferies indexes from existing
green indexes is their global reach. Only three of the existing green
indexes are global--WilderShares New Energy Global Innovation Index (NEX),
the Ardour Global Alternative Energy Index (AGIGL),
and KLD Global Climate 100 Index (GC100).
Of the other existing green indexes, one covers Europe--European
Renewable Energy Index (ERIX)--and
the remaining seven cover the US.
The constituent lists of the various green energy indexes, however,
exhibit significant overlap. Of the top ten components of the Jefferies
Global Clean Technology Composite Index, only one--First Solar (FSLR)--is
not in the Ardour Global Alternative Energy Index. First Solar is also
absent from the WilderShares New Energy Global Innovation Index, along
with Motech (6244.TWO)
and Clipper Windpower (CWP.L).
KLD Research & Analytics
does not publish the constituent list for the GC100, but publicly
available information includes some of the names in the top ten of the
Jefferies clean tech indexes, such as Vestas Wind Systems (VWSYF.PK)
and Gamesa (GAM.MC).
Jefferies spokesperson Tom Tarrant did not respond to SocialFunds.com's
request for commentary on what is distinctive about the Jefferies clean
tech indexes.
According to backtests by Jefferies, the Jefferies Global Clean
Technology Composite Index and Energy Generation Index would have
significantly outperformed the S&P 500, while the Jefferies Global Clean
Technology Energy Storage Index would have underperformed significantly.
Of course these indexes are comprised of small- and mid-cap companies,
so comparison with the
Russell 2500 index of "smid"-caps (small- and mid-caps) would have
provided a more accurate benchmarking with the broader market of like
companies.
Jefferies also introduced its Global Industrial Biotechnology Index (JGCTIB)
last week, which overlaps with its three clean tech indexes by including
biofuel companies such as Pacific Ethanol (PEIX),
Biopetrol Industries (B2I.DE),
and D1 Oils (DOO.L).
However, this index also focuses on genetically modified organisms (GMOs).
Many socially responsible investing (SRI) firms screen out companies
involved in GMOs due to the environmental as well as reputational and
regulatory risks associated with genetic engineering. SRI research firm
Innovest
Strategic Value Advisors documented such risks in its 2005
report on Monsanto (MON),
the top constituent in the Jefferies Global Industrial Biotechnology
Index.
In addition to these four green-related indexes, Jefferies introduced 16
other indexes last week, many covering other energy sectors, such as the
Jefferies Global Oil Service Index (JGOS),
the Jefferies Global Drilling Contractor Index (JDC,
and the Jefferies US Tanker Index (JUST).
Halliburton (HAL),
a company screened from many SRI portfolios on environmental and ethical
grounds, is the second-largest constituent in the Global Oil Service
Index.
The
methodology summaries for these indexes do not mention any
environmental or ethical criteria. Jefferies spokesperson Tom Tarrant
did not respond to SocialFunds.com's questions on whether the company
employs environmental criteria on its other indexes.
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