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Investing for the Soul

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Shareholder Values

 
"70% increase since 2007 in the number of investors capitalizing on environmental trends [and] 54% of investors plan to invest in environmental technology over the next year."
-- Allianz Global
    Investors
    (USA) February 2010

"Canadian investors are generally favourable towards SRI. A third (32%) said they are 'very' or 'somewhat' interested. [Another] 55 per cent indicated that they would consider SRI if the return was 'as good or better' than other investments... The majority of investors surveyed view SRIs as 'futuristic' (78%) and 'a win-win for the individual and society' (77%)."
-- Ipsos Reid/
    Standard Life
    (Canada) October 2011

"European HNWI [High Net Worth Individuals] Sustainable Investment market... approximately €729 billion, representing an average of about 11% of European HNWIs’ portfolios as of December 31, 2009. This is a growth rate of 35% over the two-year period since the data was previously collected."
-- Eurosif
    (EU) September 2010

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.