FTSE to reflect ‘green’ growth

By Fiona Harvey, Environment Correspondent
Published: June 15 2009 17:54

The growth of the environmental technology sector is to be reflected in new indices from FTSE Group.
Although there have been dozens of new additions to the number of “green” technology companies in the past years, the lack of a separate category for the sector has made it difficult for investors to identify such companies and compare them.

FTSE will this week introduce seven indices covering markets such as the UK’s Alternative Investment Market, Japan, the US, Europe and one for the Asia-Pacific region excluding Japan. Donald Keith, deputy chief executive of the group, said the tools would support capital markets’ response to the desire of governments to develop low-carbon economies.
Pure-play environmental companies have outperformed companies for which low-carbon goods and services are only part of a wider offering, according to research published on Monday by HSBC.
The bank found pure-play stocks outperformed other green technology companies by 45 per cent and outperformed global equities by 43 per cent in the year to date. Pure-play companies made a return of 8 per cent on the year to date, compared with 7.2 per cent for global equities.
Of environmental stocks, energy efficiency and energy management specialists enjoyed the strongest sectoral return, up 16 per cent on the year to date.
The energy efficiency technology sector now trades at a 20 per cent premium to low-carbon companies overall, reflecting its earnings growth of 23 per cent. Energy efficiency is benefiting strongly from government stimulus packages. Of a total of $350bn allocated, the energy efficiency sector is due to receive 53 per cent.
HSBC, which tracks low-carbon and environmental companies through its Global Climate Change family of indices, said the waste sector fared worse than other green companies overall. Waste stocks and integrated power stocks were the only two of the company’s 18 investable “themes” in the climate change indices to register a loss since the beginning of the year.
The bank said the failure of many rich countries to meet Kyoto protocol targets on cutting emissions and slow progress on talks about a replacement to Kyoto had not dented optimism in the sector.
Copyright The Financial Times Limited 2009