Invesco has launched a new ETF in Europe providing targeted exposure to the global solar industry.The Invesco Solar Energy UCITS ETF has been listed on London Stock Exchange in US dollars (ISUN LN) and pound sterling (RAYS LN) and on Xetra (S0LR GY) and Borsa Italiana (SOLR IM) in euros.
The fund is linked to the MAC Global Solar Energy Index which was developed by solar industry experts and is administered and calculated by S&P Dow Jones Indices.
The index selects its constituents from a universe of developed market stocks and American Depository Receipts with market capitalizations greater than $250 million and average daily trading volumes above $750,000.
The methodology screens for companies that derive at least 33% of their revenue from operations linked to the solar industry. This includes producing solar power equipment, supplying raw materials and components to solar producers and developers, and conducting solar power installation, development, integration, maintenance, or finance.
Any company that is engaged in the extraction of coal, petroleum, or natural gas, or generates electricity using coal, petroleum, or nuclear fuel, is excluded. Firms that fail a corporate governance test are also removed.
The remaining constituents are initially weighted by float-adjusted market capitalization, while any company that derives more than 66% of its revenue from solar activities will have its weight multiplied by a factor of two. Individual stocks are capped at 10%, while the cumulative weight of stocks with weights above 4.5% is capped at 45%.
As of 31 July, the index was approximately evenly split between companies listed in North America (39%), Asia (33%), and the EMEA region (28%). Stocks from the information technology and renewable electricity sub-sectors dominated with weights of 39% each followed by industrials at 17%. Notable positions included Enphase Energy (11.9%), SolarEdge Technologies (10.5%), Xinyi Solar (7.4%), Sunrun (6.8%), First Solar (6.3%), and GCL-Poly Energy (4.3%).
The ETF comes with ongoing charges of 0.69% and is classified as Article 8 under the European Union’s Sustainable Finance Disclosure Regulation (SFDR).
The fund is the second dedicated solar ETF to be introduced in Europe following the launch in May of the Solar Energy UCITS ETF (TANN LN) which was brought to market through a partnership between US-based EQM Indexes and London-based white-label ETF platform HANetf. This fund tracks the EQM Global Solar Energy Index and also comes with an expense ratio of 0.69%.
Gary Buxton, Head of EMEA ETFs and Indexed Strategies at Invesco, commented: “Leaders of the major economies of the world may not agree on many things, but they are united in tackling climate change. With the goal of reaching net-zero carbon emissions in the next few decades, plans set out by the governments of the US, UK, EU, and China all involve a substantial increase in their capacity to generate electricity from renewable energy. Their ambitious plans become realistic when you consider the economics with solar energy on track to soon become the lowest-cost electricity in history.”
Richard Asplund, Managing Director at MAC Solar Index, said: “We have been working with Invesco for 13 years and are excited they are bringing our solar index to investors in Europe. The index methodology is fundamentally the same as when we created it in 2008. It is designed to track the performance of companies globally within the solar energy industry with diversified exposure to all solar technologies, the entire value chain, and related solar equipment. The biggest change has been in our universe. For example, solar tracking systems have been around for decades, but the companies are only now appearing in our index as the technology becomes more cost-effective.”