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1.3.1 InfraGreen index methodology

Objective

Wind and solar energy is a growing segment of the infrastructure market, which represents about 25% of the global infrastructure investment universe. Infrastructure investors often invest in funds or portfolios which are solely allocated in these two sectors. This is the key objective behind the creation of the infraGreen index. It is designed to reflect the financial performance of Wind and Solar energy generation projects which can be used by investors in these two segments of the market to benchmark their performance and get a clear understanding of the market.

Data

Company universe

The index uses the infraMetrics company database, which covers more than 700 infrastructure companies globally since 2000. Each of these companies has been classified under the TICCS taxonomy by our team of analysts. In all the calculations, equity and quasi-equity stakes in a company, like shareholder loans (which sometimes can be the largest part of the capital investment), are aggregated into one unit of account.

Cash flows

infraMetrics database contains historical financials of all the infrastructure companies in its universe, including the dividends paid out by infrastructure companies to equity investors, which is used as the source of the cash flow data.

Valuations

The index uses the monthly valuations of each infrastructure company produced in infraMetrics according to the asset pricing methodology. They reflect the valuations of infrastructure companies on a marked-to-market basis, thus ensuring that the benchmark always captures the latest market trends.

FX rates

The index in currencies (other than the local currency of each constituent) uses the FX spot rates (mid-point of bid and ask prices) sourced from fixer, which represent the rates as of the last weekday of each quarter. These FX rates are used to convert the cash flows and valuations from the constituent’s local currency to the base currency of the index.

Interest rates

Marked-to-market valuations require an updated term structure of interest rates every quarter in all geographic markets considered in the benchmark. We source the raw government bond rates with different maturities as of the last weekday of each quarter from Datastream (Refinitiv) and develop the interest rate yield curves to create full-term structures spanning all the maturities.

Index Computation methodology

From the infraMetrics database of infrastructure companies, we select the companies belonging to the TICCS Codes IC7010 (Wind Power Generation) and IC7020 (Solar Power Generation) to be included as constituents of this index.

The valuations of each of these assets from their inception (or first year of reported accounts ) and their historical cash flows are used to calculate the total returns of the infraGreen index. All the constituents remain in the index until the end of their contractual period unless we are unable to source their audited financial data, in which case the constituents drop from the index. The list of index leavers and entrants is published for all the index users.

Index weighting scheme

The infraGreen index is available with two weighing schemes.

  1. Equal weights: each constituent gets an equal weight in the index. These weights are rebalanced on the last date of the previous quarter:
    where,
    denotes the weight of the constituent at time
    denotes the number of constituents in the index

  2. Value weights: the weights are proportional to the market capitalisation of the equity investment in the project. The weights are calculated at each rebalancing date using the following formula:
    where,
    denotes the weight of the constituent at time

    denotes the number of constituents in the index
    denotes the equity market capitalisation of constituent at time

Index-constituent value weights are calculated in the reference currency (USD) so that all constituent market values denominated in a different currency than the reference currency are converted accordingly.

Creating the index

Each underlying constituent’s historical valuations and dividends are converted from local currency to the base currency of the index using the historical FX spot rates. Then total return of each constituent is calculated in the base currency as a combination of both price return and cash yield.

After this, the index return is computed as the weighted average of the constituent returns, and the weights are computed as per the previous section.

The index value is set to 1000 on the initialization date of the benchmark, i.e., 31st Dec 2005, following which the index values are computed using the computed total returns of the index.

List of analytics

A number of analytics are produced along the index to give the users a more in-depth view of the index concentration in different segments of the market. The analytics also provide a full understanding of the risk-return profile of the index and the underlying drivers.

Index Performance (cumul. %)

Turnover ratio

Total Returns Cumulative

Total Returns Annualised

Return Volatility

YoY Total Returns

Price Returns

Capital Returns

Income Returns

Sharpe ratio - modified

Max Drowdown

VaR Cornish Fisher 99.5% 

VaR Cornish Fisher 97.5% 

Effective number of constituents

Effective number of TICCS

Index Price

Index NAV

Index Description

TICCS Contributions - yoy

TICCS Contributions last qtr

Current constituents

Dropped constituents

New entrants last 12m

Leavers last 12 m

TICCS Allocations

TICCS Allocations last quarter

ESG Disclosures

The infraGreen index is meant to provide an overview of the financial performance, including the risk and return, of Wind and Solar Power Generation Companies across the world. This sector is commonly referred to as green power, and as such, this index doesn’t pursue environmental factors as considered by the regulation, given its intent to obtain sector exposure and the fact that it has not expressly calculated ESG scores for its constituents. The sole objective of this index is to be used as a representation of this market segment and not to support the ESG strategy or objectives of an investment strategy.

Furthermore, we provide the following disclosures about the infraGreen index in line with the regulations set out by ESMA:

  1. The infraGreen index is 100% exposed to renewable energy companies as measured by capital expenditures (CapEx in those activities as a share of total CapEx by energy companies included in the portfolio)

  2. The infraGreen index is 100% exposed to the sectors listed in Sections A to H and Section L of Annex I to Regulation (EC) No 1893/2006 of the European Parliament and of the Council as a percentage of the total weight in the portfolio.

  3. The infraGreen index is 100% exposed to the companies the activities of which fall under Divisions 05 to 09, 19, and 20 of Annex I to Regulation No 1893/2006.

  4. The infraGreen index is 100% exposed to the activities included in the environmental goods and services sector, as defined in Article 2, point 5 of Regulation (EU) No 691/201 of the European Parliament and of the Council.


Refinitiv. Datastream. https://www.refinitiv.com/en/products/datastream-macroeconomic-analysis

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