Daniel Englander

Institutional Investor Plays Footsie with FTSE January 23, 2008 at 9:08 AM

FTSE’s new ET50 index, which tracks the 50 largest pure play greentech companies by market cap, has picked up Sweden’s AP7 as its first benchmarking fund. The ET50, which debuted last week with a $170 billion market cap, tracks companies in power gen and energy efficiency (68%), water tech and pollution controls (15%), and waste and resource management (17%). It’s five largest holdings are Vestas (11.34%), SunTech (7.25%), First Solar (6.03%), Gamesa (4.99%), and Iberdrola (4.08%), with the top 10 companies comprising nearly 50% of the index. ET50’s geographic distribution is heavily weighted towards U.S. companies (41.19%), with Denmark (14.97%) and Spain (10.57%) rounding out the top three.

While other major indices, such as WilderHill and Clean Edge, focus primarily on power gen and utility stocks, the ET50 has broadened its approach to take a more comprehensive look at the greentech market. By including companies operating in the decidedly necessary (but considerably less sexy) areas of waste and water technology, the ET50 is signaling to the investment community that greentech is about more than just generating electricity. Incorporating sustainable solutions into our management and treatment of water and pollution is an essential compliment to the growth of renewable energy. Pursuing one without the other would lead to unbalanced environmental outcomes. That these companies are among the the 50 largest greentech companies by market cap only serves to highlight their importance.

AP7 - Sweden’s national pension fund - has roughly $7.2 billion under management, and sought out the ET50 because it’s comprehensive indexing mirrors the composition of AP7’s own portfolio. Diversified indices that give investors the ability to combine investments in one place and track these diverse portfolios against the markets may begin to replace the power-heavy indices currently operating as the greentech market matures and investors seek opportunities outside of power gen. Remember, water tech has a 6.6 billion person consumer base.

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