The FTSE Environmental Technology Index (ET50) is made up of the 50 largest companies with a “pure play” approach to this area. This index performed well up to 2008, but took a very sharp drop compared to other indices.
A “pure play” approach is categorised as having over 50% of either revenues, income or capital dedicated to clean technology. These companies generally have a smaller market cap than the companies in the FTSE100 or the MSCI World.
The Financial Crisis
Over the financial crisis following the collapse of Lehman Brothers in September 2008, stock markets suffered. As you can see from the graph, the Environmental Technology Index, which had been experiencing high levels of growth, took a dramatic fall. Investors sold their shares in “risky” companies as they took more cautious positions, renewable energy stocks were particularly effected.