What kind of index has only 0.8% of the market capitalisation?
Not this one.
After a quick look through the companies listed in the ASX cleantech factsheet, there is no way I am leaving them all in. But this does raise some interesting questions. An index is not supposed to be selective, it should include all the companies in the sector, even if they look like dogs. But I feel compelled to put a filter on the companies involved. This is really hard to describe up front, since I wasn't really sure what I was looking for, but I think the key is energy - clean energy. I'll try now to summarise why I'm excluding some things, but sadly some of this is going to happen behind the scenes.
First off is the biggest company in the list, SIMS. They take metal scrap and turn it back in to metal for industrial purposes. That is really important, and most likely really profitable, since they've been doing it since 1917. Is recycling important - you bet, do we need to do it better and more frequently - yep. Is it part of my clean tech index - nope. For ease, I'll drop the entire WASTE category.
That makes 63 companies, Capitalisation of AU$3.2B
Next is WATER. From a brief look, these companies are about looking after our water-based environments. Not really about energy.
Gone. 57.
OTHER? Gone. 53. (These are mainly investment firms, who hold stock in the sames stocks anyway)
VEHICLES? This seems to be a small number of companies developing better engine technologies. OK, but not energy.
50.
ENVIRONMENT? That sounds good, but a quick look shows these are really engineering consultants who have a branch in the 'environmental' consulting, which as I understand is just telling mining and development companies that they are meeting minimum environmental criteria, not really making anything better.
GONE. 45.
BIOGAS? This is only two companies, larger companies making energy from diesel for remote areas. I'm not a fan - why not go solar? Gone. 43.
BIOFUEL? This is one of those grey areas - but it seems they are making diesel from renewable sources, so let's keep it in just to give us a fair range. The trucks and trains will probably run on diesel for a while, let's make it from aussie farms.
CARBON? Perhaps, I'm not sure about this one, at some point we are going to have to work on offsetting the current pollution while we develop the alternatives.... Also, there has to be a pop in this sector when the carbon tax comes in, so lets keep these three companies in.
EFFICIENCY? I like some of this sector, but really, which companies on the ASX are not engaged in making what they do more efficient? That's a fundamental to running a business. It would be different if they were specifically engaged in making homes or vehicles more energy efficient, but I don't believe this is the sector the ASX is talking about. For now it's GONE.
That leaves just 34 companies. AU$2079M or 0.2% of the ASX.
I don't quite believe it. I'm going to have to come back to this, but I can say it takes a lot of time to look through to see what companies do, and if you were paying attention, you'll see I really don't know what I'm talking about here. All I've done is look at 1-5 of the companies summary in Google Finance and see if I like what they say. I also believe that some of the bigger companies could go in here, maybe Origin energy? But I'd have to think a bit more about that.
For now, here's what we've got left:
Solar 6 685
Storage & Fuel Cells 5 679
Wind 1 267
Geothermal 11 212
Biofuel 7 104
Wave 1 68
Carbon 3 64
Total 34 2079
So solar is the biggest sector by capitalisation, but geothermal is much bigger in terms of companies.
Solar is only the largest because of the inclusion of Silex, who recently acquired "Solar Systems", a great company with reflecting concentrating solar technology. Other than that acquisition, the bulk of their business is in uranium enrichment for the nuclear power industry. GULP. Take them out and you drop out another $500M and one of the most promising solar companies around. I'm leaving them in. For now.
