Index tracks the 'next big thing' in sustainability

By Kylie Wilson-Field, Journalist
Tuesday, 25 March, 2008

In recent times the sustainability sector has seen a massive surge in investments in green companies and products, from both the big end of town and smaller investors. It's not surprising as there is a lot of money to be made and like most things it's best to get in now before it really takes off.

Launched in Melbourne recently, the ACT Australian Cleantech Index will be able to track the performance of more than 75 Australian-listed stocks in the cleantech industry, with a combined market capitalisation of more than $13 billion. The Index is the first of its kind in Australia and will provide investors with a vehicle to diversify into the emerging cleantech investment category.

The new index is an initiative of Australian Cleantech Consulting (ACT), which provides assessment and investment analysis for the cleantech sector.

John O'Brien, managing director of ACT, believes that concerns about climate change and energy consumption have led to greater interest in the cleantech industry and an increase in the economic value of clean technologies.

"For the first time we will be able to provide a picture of the Australian cleantech industry's growth in a single measure," he says, adding that in 2007, a trailed ACT Australian Cleantech Index outperformed both the ASX 200 as well as the ASX small ords.

"The growth of the renewable-energy sector in Australia will be driven by the Federal Government's commitment to achieve 20% of energy generation from renewable sources by 2020."

The ACT Australian Cleantech Index includes over 75 companies, large and small, from Sims Metal Group with a market capitalisation of over $3 billion to Skydome Holdings with a market capitalisation of $5 million, plus a few outstanding performers, such as CBD Energy which posted a 147% increase in returns over a six-month period to December 2007.

O'Brien says the index came about after ACT put together a research database listing all of the cleantech companies.

"Out of that we looked at the listed companies and found there was a real mix of cleantech companies, from waste to small start-up companies. So, we started to look at what the share market has been doing over the past few years and thought, 'hang on, that has done very nicely'," he says.

"We started talking to some of the fund managers and then looked around at what financial products were on the market. We didn't find anything in Australia so we started talking to fund managers about the potential for a product and effectively using the index as a demonstration guide. You could make a lot of money if you had a financial product so essentially the index was developed as a marketing tool," he says.

O'Brien says that there are an interesting group of people wanting to invest in the sector, including a number of private equity and venture capital groups.

"They've decided 2008 is the year to do renewable energy and water," he says.

"There have already been changes since the election in November which means we will start to see the big corporations leading the charge. Rather than a whole lot of small companies trying to get projects and ideas up and running, the big corporates will end up buying those ideas. It's happened in Europe; the big energy companies have spun out separate renewable energy companies. It will be interesting to see if that happens in Australia," he says.

"For the smaller companies you have to either grow quickly or get some investors. I am sure many of them would be happy to be bought out by an Origin or AGL in the future."

The ACT Australian Cleantech Index monitors companies across 14 industry sectors: solar, wind, biofuel, water, waste management/recycling, energy efficiency, green buildings, biomaterials, energy storage, fuel cells, wave, tidal, hydro, biogas generation, vehicle technologies, geothermal, carbon trading, environmental service providers, and 'other' additional companies providing sustainable outcomes.

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