Clean energy specialist Longspur Capital and corporate adviser Radnor Capital Partners have created an index that selects clean energy companies actively enabling the transition to a net-zero carbon world.
The Active Net Zero Clean Energy index is made up of 50 European clean energy companies of a universe of 137 stocks that are making a positive contribution to the active delivery of net-zero targets.
The index incorporates the two firms’ Active Net Zero methodology which evaluates companies based on their actual performance towards the energy transition.
The firms said the index was created in response to the need for more stringent inclusion criteria for the clean energy sector to avoid greenwashing.
Currently, it said mainstream indices include companies that may have made net zero promises but are yet to deliver material green revenues or capex commitments.
In order to avoid liquidity risks that have hampered some indices this year, the index has average daily volume minimum criteria using one-month and six-month average daily value traded.
It also has a maximum 9% weight for individual constituents and the cumulative weight of the stocks that surpass 5% are not allowed to exceed 35%.
The index is administered by Elston Consulting.
Adam Forsyth, head of research at Longspur Capital, commented: “We were looking to create a universe and index that was not just reliant on negative screening, and ‘clean’ or ‘green’ labels.
“We wanted to create a systematic methodology that reflects a company’s active engagement and progress in pursuing a net-zero outcome.”
Iain Daly, director and co-founder at Radnor Capital Partners, said: “Investors are eager and willing to invest in the companies building a more sustainable future, but the means to do this are not immediately clear.
“This index identifies those companies helping the world reach net-zero, rewarding genuine contribution not vague or unrealistic promises.”
Henry Cobbe, head of research at Elston Consulting, added: “Clean energy has proven a popular asset class, but until recently the exposure has been rather concentrated that was a contributor in part to heightened volatility that made it harder for inclusion within portfolios.”
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