Philosophy Behind WilderHill® Clean Energy Index (ECO)
A priority of the WilderHill® Index (ECO) is to define and track the Clean Energy sector: specifically, businesses that stand to benefit substantially from a societal transition toward use of cleaner energy and conservation. Stocks and sector weightings within the ECO Index are based on their significance for clean energy, technological influence and relevance to preventing pollution in the first place. We emphasize new solutions that make both ecological and economic sense, and aim to be the leaders in this field.
Visit the New York Stock Exchange (NYSE) website, for specifications, history, and information on live calculations of the WilderHill Index, symbol ECO. The PowerShares WilderHill Clean Energy Portfolio, symbol PBW, seeks to mirror the performance of ECO. Investors who wish to trade the clean energy sector as defined by the WilderHill Index—via that independent fund PBW—can contact their Broker, or PowerShares. We note that Exchange-Traded Funds (ETFs) generally carry the characteristics of intra-day trading and transparency.
For more on the antecedents to the WilderHill Clean Energy Index, see "Capitalizing on Solutions that Can Make Ecological and Economic Sense.". We subscribe to modern portfolio theory and believe that for ECO the advantages of an indexing approach are persuasive. We pursue 'intelligent-indexing' combining analysis-based stock selection with sector weightings, according to technological and ecological considerations. Notably we don't change composition more often than Quarterly Index rebalancings. We don't try to 'beat the market'-nor try to pick 'under-valued' stocks.
We do not take defensive positions within the Index when the markets decline, appear over-valued, or the Index is experiencing unusual volatility. Rather than try to select Index components based on financial or market data, we robustly look at clean energy broadly conceived and select stocks and sectors on technical and environmental criteria. We judge our performance by how well the Index tracks movements of the clean energy sector-down and upwards-and anticipate significant ongoing volatility in this sector.
We apply qualitative analysis at the Quarterly rebalancings to determine Index securities, sectors and weightings. Criteria include importance of the stock and sector to clean energy, relevance to climate change, pollution prevention, technological significance, intellectual property rights, salience to preserving biodiversity or ecological integrity and other non-financial criteria. The Index is expected to be a diversification tool. Given the inherent volatility of this sector with many small high-tech companies and strong price movement, the WilderHill Index (ECO) is expected to be notably volatile as well. Nuclear power is not allowed in ECO.
We weight the Index sectors according to importance and technological relevance, not views about individual stocks. ECO components are evenly divided within a sector to assign weights--we feel this modified equal weighting is the most intellectually-robust approach for ECO. Following Quarterly rebalancings, stocks will move for the next three months according to their respective prices, and then are automatically reset for the next Quarter's start.
WilderShares, LLC is an Index Provider and the source for the WilderHill Clean Energy Index (ECO). Our emphasis is on new solutions that make ecological and economic sense. The real-time Indexes from WilderShares are designed to be leading benchmarks, and may be licensed to third parties offering tracking funds seeking to mirror the performance of our Indexes. WilderShares, LLC is an independent company.
ECO INDEX® CONSTRUCTION
(1) The Clean Energy Index uses modified equal dollar weighting. No single stock may exceed 4% of the total Clean Energy Index weight at the start of quarterly rebalancings.
(2) For a stock to be included in the selection universe, the company must be identified as one that has a significant exposure to clean energy, or contribute to the advancement of clean energy, or be important to the development of clean energy.
- Companies in the Clean Energy Index generally (i) work to further renewable energy efforts and do so in ecologically and economically sensible ways; or (ii) help prevent pollutants, such as CO2, NOx, SOx or particulates-avoiding carbon or contaminants that harm oceans, land, air, or ecosystems structure; or (iii) de facto incorporate ideals of the precautionary principle or pollution prevention into their energy efforts.
- Companies in the Clean Energy Index generally will not have their majority interests in the highest-carbon fuels: oil or coal.
- Large companies with interests outside clean energy may be included if they are significant to this sector.
(3) Market capitalization for a majority of Clean Energy Index stocks is typically $200 million and above. To account for notable but smaller companies sometimes significant to the clean energy field, a minority of Clean Energy Index stocks may have market capitalizations between $50 million and $200 million.
(4) Stocks in the Clean Energy Index generally as a guideline should:
- have three-month average market capitalization of at least $50 million;
- have a three-month average closing price above $1.00;
- be listed on a major U.S. exchange such as the NYSE, AMEX or NASDAQ and if a foreign company have their ADR listed on one of these exchanges;
- reach minimum average daily liquidity requirements for sufficient trade volume.
The Index is calculated using a modified equal dollar weighting methodology. Component securities and weights are determined by their respective sector and size. Each Sector is assigned an aggregate weight within the index. Components less than $200 million in total market capitalization are set to one-half of a percent (0.5%). The remaining components in each Sector are equally weighted by using the Sector weightings minus the sum of the weights of less than $200 million in market capitalization. Sector weightings were initially determined by the Index Provider and are reviewed each quarter in conjunction with the scheduled quarterly review of the Index. Within each sector the components weighting cannot exceed four percent (4%) of the index.
(Prior to Sept. 2006 the Index was calculated using a modified equal weighting methodology with components equally weighted within their respective Sector, each Sector assigned an aggregate weight, sector weightings initially determined by the Index Provider and reviewed each quarter in conjunction with quarterly review, and within each sector components weighting could not exceed three percent (3%) of the index).
Companies selected include those focusing on the technologies for utilizing greener, renewable sources of energy. These technologies include renewable energy harvesting or production, energy conversion, energy storage, pollution prevention, improving efficiency, power delivery, energy conservation, and monitoring information.
There is a strong bias in favor of the pure-play companies in wind power, solar power, hydrogen and fuel cells, biofuels, and related fields; companies in relevant fields such as hydroelectric, geothermal, wave, tidal, waste heat recapture and others will be considered with respect to carbon content, the impacts upon marine and terrestrial biodiversity, and degree to which they advance or reflect the clean energy sector.
The Index is generally comprised of companies in the following areas:
Renewable Energy Supplies - Harvesting: These are producers of energy that's renewably-made, or the companies relevant to clean energy production such as the makers of blades or materials used in wind power, the makers of solar photovoltaic (PV) panels, companies in solar thermal generation, thin films, those working in geothermal and recovered energy generation, ocean power, etc. These generally renewable methods can often supply the desired power directly where needed –- or 'green' energy might be stored to become desirable firm power. Solar, wind, geothermal, small hydro, greener waste-to-energy, etc all notably carry less burden of pollution, CO2, prevent harm in the first place and many of these sources may allow for Distributed Generation.
Energy Storage: This wide-ranging category includes advanced batteries that can store energy in both familiar and innovative new ways, the materials and their precursors in battery chemistries; nanotechnology for better storage as well as exotic materials and processes; thermal storage using molten salts; hydrogen storage by compression, hydrides; the flywheels that make use of momentum and spinning at high speeds to store energy, and other innovations in storage: for example, supercapacitors that build and release large amounts of power very quickly. Because most renewable power is not 'firm' meaning not always on -- like the solar generation that will work only by day, or the wind power available mainly during windy times -- joining renewable power with these advanced means of energy storage systems often makes sense.
Cleaner Fuels: Includes makers and facilitators of biofuels derived from renewable crops; for example using cellulosic, sugar, or other feedstock in ethanol, biobutanol, or biogasoline — or using vegetable oil feedstock in biodiesel, etc. Biomass, better waste to energy, etc may be included as well. In the future hydrogen too as lightest and most abundant element may become an energy carrier, moving power made one place to where it’s helpfully needed. However there are numerous daunting technical challenges here including lack of hydrogen infrastructure and very high current costs. Hydrogen and fuel cells are only in early technical development, not widely commercialized, and still prototypes that are far more costly than fossil fuels in practice.
Energy Conversion: Can be whole, integrated conversion systems for useful work such as electric & plug in vehicles - or discrete innovations yielding desired ends such as within visual displays, electric motors or propulsion. May encompass for instance areas of heating, lighting, etc, and the strategic materials or designs for items like LEDs, motors, converters. Includes devices converting fuels or inputs to desired power as needed: for example fuel cells are electrochemical means to convert hydrogen-rich fuel to electricity; there are other diverse processes such as thermoelectric conversion for waste heat etc.
Power Delivery and Conservation: Of importance in clean energy systems are electronics needed to smooth power outputs, convert DC to AC, enhance power delivery and the grid, conservation, or better match power loads to output. Included are for instance inverters and equipment for power conditioning; power management such as in vehicles; capital machinery and equipment for improved systems such as solar panels, LEDs, networking, monitoring. Uninterruptible or high quality power may be desired that combines storage with conditioning. Notably products for new energy efficiency and conservation broadly conceived are included: this can include various end-use improvements, such as makers of exceptionally efficient goods, or products curtailing need for power in the first place.
Greener Utilities: Among utilities some increasingly adopt cleaner methods for making electric power including by wind, hydro, solar, and geothermal; these cleaner means can prevent pollution while helping add price stability for the consumer. Unlike more conventional power plants too, renewable energy - while still costly - is widely declining in price. Should dirty coal or natural gas grow more constrained and prices there rise, or the pollutants and CO2, or accidents at Utilities become more significant - then alternative, independent, renewable means of producing firm utility power to grid could grow increasingly relevant. Also potentially included here are innovative means to cap and trade, tax, or reduce pollution from utilities. Even greener utilities are typically not (yet) clean energy pure plays; this Sector may see some inclusion of securities with fossil fuel interests. Nuclear power specifically is NOT allowed in ECO Index; nuclear is not clean, it is not truly renewable, and it is subject to vast risks of accident, waste, weapons proliferation, and terrorism attack. Nuclear is completely excluded from the ECO Index.
INDEX (ECO) SECTOR & STOCK WEIGHTS FOR START OF Q4 2013. 51 STOCKS.
Each stock freely floats according to its share price after rebalance.
* Stocks below $200 million in size at rebalance are banded with a 0.5% weight.
Renewable Energy Harvesting - 25% sector weight (11 stocks @2.27 each)
Canadian Solar, CSIQ. Solar, vertically integrated solar PV manufacturer, China.
China Ming Yang Wind, MY. Wind, large turbine manufacturer is a pure play.
First Solar, FSLR. Thin film, CdTe solar panels low-cost alternate to polysilicon.
Gentherm, THRM. Thermoelectrics, waste heat to energy harvesting for power.
Hanwha SolarOne, HSOL. Solar PV, integrated from poly through modules.
JA Solar, JASO. Solar, China-based sells PV modules in Asia, Europe, U.S., etc.
Ormat, ORA. Geothermal, working too in areas of recovered heat energy.
SunPower, SPWR. Solar, efficient PV panels have all-rear-contact cells.
Trina Solar, TSL. Solar, produces ingots, wafers, solar modules; China-based.
Yingli Green Energy, YGE. Solar, is a vertically integrated PV manufacturer.
Zoltek, ZOLT. Wind, makes carbon fiber for wind blades, product lightening.
Power Delivery & Conservation - 21% sector weight (9 stocks @2.22% each; +2 *banded)
Aixtron Aktiengesellschaft, AIXG. Deposition tools, efficient (O)LEDs, displays.
Ameresco, AMRC. Energy saving performance contracts, also in renewables.
*Echelon, ELON. Networking, better management of whole energy systems.
EnerNoc, ENOC. Demand response for better energy management, smart grid.
GT Advanced, GTAT. Solar, LEDS, production lines for poly & ingot; LED sapphire.
Itron, ITRI. Meters, Utility energy monitoring, precise measurement, management.
PowerSecure, POWR. Smart grid, demand response, distributed generation; LEDs.
Quanta Services, PWR. Infrastructure, modernizing grid and power transmission.
ReneSola, SOL. Wafers, for silicon PV, mono and multicrystalline, China-based.
*STR Holdings, STRI. Encapsulants, broad technology for range of PV panels.
SunEdison, SUNE. Producer of polysilicon used in crystalline c-Si solar PV cells.
Energy Conversion - 19% sector weight (8 stocks @2.25% each; +2 *banded stocks)
Advanced Energy, AEIS. Power conditioning: inverters, thin film deposition.
*American Superconductor, AMSC. Wind power converters; superconducting HTS.
*Ballard Power, BLDP. Mid-size fuel cells; R&D, PEM FCs such as for transportation.
Cree, CREE. LEDs, manufacturer in power-saving lumens, efficient lighting.
Enphase, ENPH. Microinverters, PV panel DC becomes grid compliant AC.
FuelCell Energy, FCEL. Large fuel cells, stationary high-temp flex-fueled MCFCs.
International Rectifier, IRF. Energy-saving, power conversion and conditioning.
Molycorp, MCP. Rare Earths, strategic elements in NdFeB magnets, wind power.
Rubicon, RBCN. Substrates, are used in the production of LEDs for lighting.
Universal Display, OLED. Organic light emitting diodes, very efficient displays.
Cleaner Fuels - 10% sector weight (4 stocks @2.12% each; +3 *banded stocks)
Air Products & Chemicals, APD. Hydrogen, is a supplier of industrial gases.
*Amyris, AMRS. Biotech, speculative R&D in renewable fuels for transportation.
Cosan, CZZ. Biofuels, Brazil-based uses sugarcane feedstock, ethanol exporter.
*Gevo, GEVO. Biotech, speculative R&D drop-in isobutanol, renewable biofuels.
*Kior, KIOR. Biofuels, catalytic process: cellulosic biomass/non-food feedstocks.
Renewable Energy Group, REGI. Biodiesel, natural fats, oils, greases to biofuels.
Solazyme, SZYM. Biofuels, microalgae grown w/o sun, drop-in diesel substitute.
Energy Storage - 14% sector weight (6 stocks @2.25% each; +1 *banded stock)
Fuel Systems Solutions, FSYS. Gaseous fuels; systems for cleaner-burning vehicles.
Maxwell, MXWL. Ultracapacitors, alternative supplement for batteries, hybrids, UPS.
OM Group, OMG. Cobalt and other precursors, producer for Li-Ion batteries, FCs.
Polypore Intl., PPO. Separators, membranes used in Li-ion, Pb-acid battery cells.
*Rare Element Resources, REE. Rare Earths, holdings for strategic lanthanides.
Sociedad de Chile, SQM. Lithium, major Li supplier for batteries; also STEG storage.
Tesla Motors, TSLA. Electric vehicles, pure-play in EVs and ESS energy storage.
Greener Utilities – 11% sector weight (5 stocks @2.20% each)
Calpine, CPN. Geothermal, major North American producer, low-carbon assets.
CPFL Energia S.A, CPL. Hydroelectric, Brazil Utility has larger, smaller hydro.
ITC Holdings, ITC. Grid transmission, advanced integration for wind/renewables.
Silver Spring Networks, SSNI. Smart grid, two-way communications aids Utilities.
SolarCity, SCTY. Downstream, installs PV and leases rooftop DG energy systems.
- Sectors, Weights and Stocks ECO - Q4 2013
- Index (ECO) Quarterly Report, Q3 2013
- Sectors, Weights and Stocks ECO - Q3 2013
- Index (ECO) Quarterly Report, Q2 2013
- Sectors, Weights and Stocks ECO - Q2 2013
- Index (ECO) Quarterly Report, Q1 2013
- Sectors, Weights and Stocks ECO - Q1 2013
- Index (ECO) Quarterly Report, Q4 2012
- Sectors, Weights and Stocks ECO - Q4 2012
- Index (ECO) Quarterly Report, Q3 2012
- Sectors, Weights and Stocks ECO - Q3 2012
- Index (ECO) Quarterly Report, Q2 2012
- Sectors, Weights and Stocks ECO - Q2 2012
- Index (ECO) Quarterly Report, Q1 2012
- Sectors, Weights and Stocks ECO - Q1 2012
- Index (ECO) Quarterly Report, Q4 2011
- Sectors, Weights and Stocks ECO - Q4 2011
- Index (ECO) Quarterly Report, Q3 2011
- Sectors, Weights and Stocks ECO - Q3 2011
- Index (ECO) Quarterly Report, Q2 2011
- Sectors, Weights and Stocks ECO - Q2 2011
- Index (ECO) Quarterly Report, Q1 2011
- Sectors, Weights and Stocks ECO - Q1 2011
- Index (ECO) Quarterly Report, Q4 2010
- Sectors, Weights and Stocks ECO - Q4 2010
- Index (ECO) Quarterly Report, Q3 2010
- Sectors, Weights and Stocks ECO - Q3 2010
- Index (ECO) Quarterly Report, Q2 2010
- Sectors, Weights and Stocks ECO - Q2 2010
- Index (ECO) Quarterly Report, Q1 2010
- Sectors, Weights and Stocks ECO - Q1 2010
- Index (ECO) Quarterly Report, Q4 2009
- Sectors, Weights and Stocks ECO - 2009 Q4
- Index (ECO) Quarterly Report, Q3 2009
- Sectors, Weights and Stocks ECO - 2009 Q3
- Index (ECO) Quarterly Report, Q2 2009
- Sectors, Weights and Stocks ECO - 2009 Q2
- Index (ECO) Quarterly Report, Q1 2009
- Sectors, Weights and Stocks ECO - 2009 Q1
- Index (ECO) Quarterly Report, Q4 2008
- Sectors, Weights and Stocks ECO - 2008 Q4
- Index (ECO) Quarterly Report, Q3 2008
- Sectors, Weights and Stocks ECO - 2008 Q3
- Index (ECO) Quarterly Report, Q2 2008
- Sectors, Weights and Stocks ECO - 2008 Q2
- Index (ECO) Quarterly Report, Q1 2008
- Sectors, Weights and Stocks ECO - 2008 Q1
- Index (ECO) Quarterly Report, Q4 2007
- Sectors, Weights and Stocks ECO - 2007 Q4
- WH Index Quarterly Report, Q3 2007
- Sectors, Weights and Stocks ECO - 2007 Q3
- WH Index Quarterly Report, Q2 2007
- Sectors, Weights and Stocks ECO - 2007 Q2
- WH Index Quarterly Report, Q1 2007
- Sectors, Weights and Stocks ECO - 2007 Q1
- WH Index Quarterly Report, Q4 2006
- Sectors, Weights and Stocks ECO - 2006 Q4
- WH Index Quarterly Report, Q3 2006
- Sectors, Weights and Stocks ECO - 2006 Q3
- WH Index Quarterly Report, Q2 2006
- Sectors, Weights and Stocks ECO - 2006 Q2
- WH Index Quarterly Report, Q1 2006
- Sectors, Weights and Stocks ECO - 2006 Q1
- WH Index Quarterly Report, Q4 2005
- Sectors, Weights, and Stocks - 2005 Quarter 4
- WH Index Quarterly Report, Q3 2005
- Sectors, Weights, and Stocks - 2005 Quarter 3
- WH Index Quarterly Report, Q1/Q2 2005