Interactive Investor

Further changes for popular clean energy index

The index has been subject to ongoing consultations due to large ETF inflows.

4th October 2021 11:45

Tom Bailey from interactive investor

The index has been subject to ongoing consultations due to large ETF inflows. 

The highly popular iShares Global Clean Energy ETF (LSE:INRG) will from mid-October onwards see another overhaul of the index it tracks, due to changes to the methodology of the S&P Global Clean Energy Index.

The ETF, which appears on interactive investor's ACE 40 list of ethical investments, experienced a surge of inflows last year, due to increased investor interest in renewable energy. As a result, there were fears surrounding the liquidity of the ETF, leading S&P Global Indices to increase the number of companies in the index. The index has been subject to ongoing consultations since.

The first change is the inclusion of emerging market listed companies. The index has previously been restricted to companies in developed markets. However, with China and other developing economies becoming increasingly important players in clean energy, going forward the index will include companies listed in such countries.

The index will also introduce “new scopes” to capture the clean energy theme. These include energy storage, smart-grid technologies and meters, electric car makers and companies involved in “efficient energy application”. The index has proposed splitting companies into “production” and “non-production” segments.

Certain metrics used to select companies have also been tweaked. The new rules require companies to derive at least 25% of their revenue from clean energy production, or a non-production green energy-related business. Meanwhile, utility companies will be included if they either generate at least 20% of their power from renewable sources, or have received “renewable utilities” classification from Global Industry Classification Standard (GICS).  The index has also enhanced its carbon intensity screen. 

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