Index Methodology

The Index is a rules-based, modified equal-weighted, liquidity-adjusted index of U.S. and Canadian-listed common stocks of companies in North America that are leaders in the transition to a low-carbon economy. Index constituents either derive significant revenue directly from renewable energy or green transportation products or services, or they meet a significant portion of their energy needs from renewable energy sources, such as the sun, wind, and water. The Index is a subset of the Morningstar Developed Americas Index (the “Index Universe”), a broad market index representing 97% of North America equity market capitalization, including large-, mid-, and small-capitalization companies.

Link to: Index Factsheet

Morningstar® North America Renewable Energy Index Methodology

Constituents are selected using a 3-part process:

Part 1: Establish Investible Universe

The index is a subset of the Morningstar Developed Americas Index, a broad market index representing 97% of North America equity market capitalization.

Part 2: Security Selection

Starting with the Index constituents in the Morningstar Developed Americas Index, the index is made up of two groups, called sleeves.

Sleeve One

This sleeve constitutes 75% of the total index weight. It includes the following companies:

  • Companies that derive at least 5% of their revenues from renewable energy
  • Companies that derive at least 10% of their revenues from green transportation.

Revenue involvement data is sourced from Sustainalytics.

Sleeve Two

This sleeve constitutes 25% of the total index weight. It includes the following companies

  • Companies that have a carbon own operations exposure less than 10 and meet at least 50% of their primary energy requirement from renewable energy
  • Companies that have a carbon own operations exposure more than or equal to 10 and meet at least 25% of their primary energy requirement from renewable energy

Carbon exposure and renewable energy use are determined by Sustainalytics. Sector weights are capped at 20% within sleeve two.

Part 3: Final Index

Securities are equal weighted within each sleeve, with a liquidity adjustment. Sleeve one constitutes 75% of the total weight, while sleeve two contributes to 25% of the index weight. The weight of securities is adjusted for their liquidity, and the residual weights are distributed to the remaining securities in the sleeve. Number of stocks in a portfolio varies depending on the selection and eligibility criteria at the time of reconstitution.