Toronto Stock Exchange takes green route

Launches clean technology index, despite wobbly global experience

BY GARY PARK FOR GREENING OF OIL

Canada’s major stock exchange is venturing where others have stumbled by launching a new index restricted to environmentally friendly companies.

The new S&P/TSX Clean Technology Index on the Toronto Stock Exchange made its debut March 25 with 21 companies whose major business is the development and use of technologies that promote renewable energy and recycling. “A growing number of investors are interested in the clean technology investing theme,” said Jasmit Bhandal, director of S&P indices in Canada.

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“This new index provides a gauge for investors to access the hypothesis that global interest in clean technology will lead to a favorable environment for clean technology companies,” she said.

First to track Canadian companies

Bhandal said the index is the first she is aware of that tracks Canadian companies.

Standard & Poor’s also has a clean energy index for the United States, as well as a global version, but decided there was room for an index with a Canadian focus.

The global index is operating, based on exchange-traded funds, but has recorded only mixed results so far.

After surging to a high in December 2007, driven by concerns that the world faced a shortage of conventional energy supplies, it has tumbled 70 percent, while the S&P 500 has risen 11.5 percent over the past five years.

Since the stock market’s bounce back, starting a year ago, the clean index has gained 41.2 percent, while the S&P 500 has gained 77.7 percent, after factoring in dividends. The fact that clean companies tend not to pay dividends is seen as a distinct negative.

Jantzi-Sustainalytics, which provides research and analysis on environmental, social and governance matters, developed the new index’s classification system.

Ungad Chadda, a senior vice president at the Toronto Stock Exchange, said the TSX “has become a key listing, financing and trading destination for clean technology companies” and the index is a “significant step forward for this important new industry sector.”

Green tech company criteria

Bhandal said green tech companies must have a minimum C$100 million in float-adjusted market capitalization to be listed on the TSX index for a minimum 12 months and meet minimum liquidity standards.

Although investors will not be able to buy into the index until exchange-traded funds are established to track the index, Bhandal said it is hoped the index launching will generate enough interest to create a product in the future.

That development should not be far off because the clean tech category is gaining attention on the TSX, with more than 120 companies listed—a world-leading number.

The TSX has also claimed that international clean-tech companies are eager to trade on the TSX because Canadian investors are familiar with the energy sector through the exchange’s long history with the oil and natural gas group.
The 21 companies on the index so far include well-established names, such as Ballard Power Systems, a pioneer in developing hydrogen fuel cells, Brookfield Renewable Power Fund, Northland Power Income Fund, Algonquin Power & Utilities and Newalta. The lesser-known companies, many of them outside the S&P/TSX composite index, include Burcon NutraScience, which says it is a health and nutrition company that purifies proteins in canola and soy.

Contact Gary Park via email publisher@greeningofoil.com