Q3 2019: Index Review & Key Developments

Welcome to our quarterly overview of stock index performance and key developments impacting the state of clean tech.

NASDAQ-CLEAN EDGE STOCK INDEX PERFORMANCE:

Nasdaq-Clean Edge stock indexes cover U.S. and global clean energy, water, and grid infrastructure markets. On a total return basis year to date (YTD) through the end of September, QGRD (global grid infrastructure) was up 29.40%,  HHO (U.S. water) increased 28.90%, CELS (U.S. clean energy) was up 22.34, and GWE (global wind) was up 17.42%, compared to the S&P 500’s 20.55% increase and IXE’s (energy select sector index) 6.10% increase.

Quarter to date (QTD), QGRD was the top Nasdaq Clean Edge index performer, rising 2.99%, followed by HHO up 2.79%, CELS up 1.52%, and GWE down 1.15%. During the same time frame (Q3 2019), the S&P 500 increased 1.70% and IXE declined 6.12%. For 12-month performance, on a total return basis, all of the Nasdaq Clean Edge indexes beat out the benchmark indexes with HHO up 11.87%, CELS up 10.20%, GWE up 8.45%, and QGRD up 6.46% compared to the S&P 500’s 4.25% increase and a drop of 19.01% for IXE.

As of September 30, 2019

CELS (U.S. Clean Energy)

GWE (Global Wind)

HHO (U.S. Water)

 QGRD (Global Grid)

S&P 500

IXE (Energy Select)

QTD

1.52%

-1.15%

2.79%

2.99%

1.70%

-6.21%

YTD

22.34%

17.42%

28.90%

29.40%

20.55%

6.10%

12 Months

10.20%

8.45%

11.87%

6.46%

4.25%

-19.01%

As of October 8, 2019, First Trust ETFs tracking the indexes equaled $664 million in assets under management.

Best and Worst Performers (Index Constituents Ranked by Q3 Price Return)

Below is a list of the top 10 best and worst constituent performers across all Clean Edge Nasdaq indexes (CELS, QGRD, HHO, and GWE).  

Best

Worst

SolarEdge Technologies Inc.

34.0%

Bloom Energy Corp.

-73.5%

Eolus Vind AB

31.8%

NIO Inc.

-38.8%

Gurit Holding AG

27.6%

JinkoSolar Holding Company Limited

-26.5%

TerraForm Power, Inc.

27.4%

TPI Composites, Inc.

-24.2%

RWE AG

27.1%

Nordex SE

-21.0%

MasTec, Inc.

26.0%

Siemens Gamesa Renewable Energy, S.A. 

-18.4%

SIF Holding NV

24.4%

BYD Company Limited

-17.2%

The York Water Company

22.2%

MYR Group Inc.

-16.2%

Enphase Energy Inc.

21.9%

American Superconductor Corp.

-15.5%

Ballard Power Systems Inc.

19.9%

General Electric Company

-14.9%

LONG-SHORT STRATEGY OUTPERFORMS OIL & GAS

The Energy Transition Long Short (ETLS) strategy continued to outperform its benchmark IXE index, beating it during all three periods tracked (QTD, YTD, and 12 months trailing).  Clean Edge partnered with FFI and Alpha Vee Solutions to create the ETLS, a rules-based alternative index strategy, to benchmark and capture the potential upside of a transition to a low-carbon economy. The strategy is long clean energy (from Clean Edge’s universe of clean energy companies) and short reserve-owning fossil fuel companies (selected from FFI's Carbon Underground 200 list using metrics that gauge a company’s exposure to stranded asset risk). Long and short positions are adjusted dynamically using Alpha Vee’s proprietary quality, value, and momentum factors.

As of September 30, 2019

 ETLS

IXE

QTD

6.38%

-6.21%

YTD

26.12%

6.10%

12 Months

21.24%

-19.01%


MAJOR CLEAN TECH DEVELOPMENTS IN Q3:

During the third quarter of 2019, we observed a number of developments and trends impacting the shift toward clean energy and water, advanced transportation, smart grid, and broader sustainability. One uber trend during the quarter was the climate strikes held by energized students across the globe (with teenage climate activist Greta Thunburg leading the charge). We expect this trend will continue to have a significant impact on the culture at large and concomitant actions. Other developments during Q3 include:  

Building Decarbonization Becomes the Next Big Thing (in California)

It started this July in Berkeley, California, when it became the first city in the nation to ban the installation of natural gas lines in new residential buildings. Since then, other cities across the state have started to join in. In September, San Jose joined the movement, becoming the largest city (10th largest, by population, in the U.S.) requiring new all-electric buildings. What happens in California is often a sign of things to come. If that’s the case, the natural gas sector must be taking note as more cities (and even states) look to decarbonize their building stock by moving away from natural gas and towards electrification.

Energy Storage Safety Comes to the Fore

Expect more safety standards and building codes for energy storage. In the aftermath of the APS explosion in Arizona, cities in that state have begun to enact battery storage laws for utilities and homeowners. And the trade group ESA issued an Emergency Response Plan template. This type of standardization of processes is a great start at ensuring safe operations of corporate energy storage facilities.

Transportation Battles and Milestones Rev Up

One of the most interesting developments of the past quarter was when a conventional gas station in Maryland ditched oil for 100% EV charging. While a U.S. first, we believe it’s definitely a sign of things to come. And while California and the Trump Administration got in a fight over efficiency standards (with the Feds trying to revoke California’s more stringent auto fuel standards), Ford, Honda, BMW  and VWGroup all stood with California (for now). Expect the battle to move to the Supreme Court, as California Governor Gavin Newsom works to ensure that California emissions standards remain intact. And in more sustainable transport news, near the end of the quarter Jeff Bezos announced a sweeping climate plan for Amazon, including a promise to purchase 100,000 electric delivery vans.

Forestry and Climate Action Grows

While trees burned uncontrollably in the Amazon, there were increasing calls for better forest management (including reforestation) to help battle the climate crises. One massive plan to expand forests was recently profiled by NRDC. The restoration of Earth’s forests could capture two-thirds of man-made carbon emissions, according to the researchers.

Trump Blowback: U.S. Offshore Wind Poised for Expansion

While President Trump digs coal and maligns wind energy, the U.S. offshore wind sector continues to gain momentum. U.S.-based General Electric announced orders for its massive new 12MW offshore wind turbine while five east coast governors pushed the Feds to allow offshore development to move forward. And new forecasts from the Global Wind Energy Council project that global offshore wind will expand nearly an order of magnitude from 23 GW today to 200 GW by 2030. The U.S. could see 10 GW of capacity additions through the end of the next decade according to the council.

Disclaimer:

The information contained above is provided for informational and educational purposes only, and nothing contained herein should be construed as investment advice, either on behalf of a particular financial product or an overall investment strategy. Clean Edge, Inc., does not make any recommendation to buy or sell any financial product or any representation about the financial condition of any company or fund.