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
At the end of February, Standard and Poorís (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&Pís 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 indexís 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
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 ó particularly renewable energy and water ó 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
"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
"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.