The new index is comprised of companies with lower-carbon approaches relevant to climate change focused on the generation and use of cleaner energy, conservation and efficiency, and advancement of renewable energy.
The WilderHill New Energy Global Innovation Index (NEX) includes 86 companies in wind, solar, biomass & biofuels, small-scale hydro, geothermal, marine and other renewables. In addition, the NEX includes companies targeting improvements in generation, distribution and storage of energy, as well as conservation, efficiency, materials, in the emerging hydrogen and fuel cell sectors, and in associated services.
The NEX aims to be accepted as the purest and most authoritative benchmark for the development of the clean energy industry worldwide and, crucially to attract a high volume of money to track the performance of this emerging sector, without being limited by the liquidity constraints of any individual stocks.
In back-testing by the American Stock Exchange, calculation agent for NEX, the index has shown a return of 29.3% per annum over the past three years, and 19.3% during the course of 2005.
The NEX constituents trade on 18 markets around the world and at the start of 2006 have an average market capitalisation of $3.1 billion with an aggregate of $270 billion. The NEX is biased in favour of purer-play companies in renewables allowing smaller-cap and mid-cap companies to have a leading role in the Index composition. Larger companies with diversified businesses may be included but only if they have meaningful exposure to clean or renewable energy.
The NEX is divided into nine sectors, the largest of which is solar, with 15 constituents, followed by wind with 12, and biofuels and biomass with 11. Also included are other renewables such as marine and geothermal energy along with hydrogen and fuel cells, power storage; generation efficiency & smart distribution; demand-side energy saving; and services & suppliers to the industry.
The index will be rebalanced quarterly with the addition of new qualifying companies and the removal of companies that no longer qualify.
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