The MAC Global Solar Energy Index (“Index”) is designed to track the global solar energy equity sector. The Index includes companies listed on exchanges in specified countries that derive a significant amount of their revenues from solar business activities.
Constituent stocks must be listed on an exchange in one of the following countries: Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Hong Kong, Ireland, Italy, Japan, the Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland, the United Kingdom, or the United States, and effective March 2021, the following countries will be added to the list of countries in which constituent stocks must be listed: Israel, Luxembourg, South Korea, and Taiwan.
The Index selects stocks based upon the relative importance of solar power within the company’s business model. Segment revenue is the primary metric used for determining a company’s solar exposure if available, but other metrics may be used for determining solar exposure depending on availability, such as EBITDA, net income, earnings, balance sheet, portfolio holdings, cash flow, cash available for distribution (CAFD), solar electricity capacity or production in energy terms, or other relevant metrics.
Companies that qualify for inclusion in the Index must derive a significant portion of their revenue, or other relevant metric, from operating in the following business segments of the solar industry: solar power equipment producers including ancillary or enabling products such as tracking systems, inverters, batteries, or other energy storage systems; suppliers of raw materials, components or services to solar producers or developers; companies that produce solar equipment fabrication systems; companies involved in solar power system installation, development, integration, maintenance, or finance; companies that produce hydrogen using solar energy; companies that provide solar-powered charging systems for electric vehicles or other electric devices; companies selling systems that use solar thermal energy to produce heat or electricity; or companies that sell electricity derived from solar power.
The Index is constructed as follows.
To determine whether solar power is a significant component of a company’s business, the Index Provider uses the following process. All publicly-traded companies with any connection to the solar industry, and are listed in one of the countries specified herein, are identified by company description database searches and bottom-up industry research of publicly available information and databases. Based on a review of the company’s public filings and company description, companies that are identified through the initial search are put into groups:
- Pure-Play Group — Companies that generate in excess of two thirds of their revenue from solar related business are considered to have their primary business in the solar industry and are placed in the Pure-Play Group. These are assigned an “Exposure Factor” of 1.0.
- Medium-Play Group — Companies that operate in multiple industries but have significant exposure to the solar industry — defined as generating less than approximately two thirds but more than approximately one third of their revenue from solar related business — are placed in the Medium-Play Group. These are assigned an Exposure Factor of 0.5.
- Eliminated Group — Companies with marginal exposure to the solar industry — defined as generating less than approximately one third of their revenue from solar related business — are eliminated from consideration as an Index constituent.
From the securities in the Pure-Play Group and Medium-Play Group, securities eligible for inclusion in the Index that are not existing constituents of the Index must be listed on an exchange in a specified country, as defined herein, have a minimum float-adjusted market capitalization greater than or equal to $150 million at the reference date preceding each rebalance, and have a minimum one month average daily trading value of $750,000 at the reference date preceding each rebalance. Securities in the Pure-Play Group or Medium-Play Group that do not meet these criteria are excluded from consideration as an Index constituent. Securities that are already in the Index are not subject to the minimum market capitalization and trading value to remain constituents of the Index.
The weighting of Index constituents on the rebalance date is determined as follows:
- The float-adjusted market capitalization for each security is multiplied by its Exposure Factor of either 1.0 or 0.5, meaning the market capitalization for the securities in the Pure-Play Group is taken at full value and for the Medium-Play Group is reduced by one half.
- The resulting adjusted market capitalizations are used to create a standard market-capitalization-weighted index with raw weighting factors.
- If necessary, the raw weighting factors are modified through a weighting-gap rebalancing algorithm to ensure that, at the time of rebalance, no security in the Index has an individual weighting greater than 10% and that the aggregate weighting of securities in the Index with individual weightings of more than 4.5% is no more than 45.0% of the total Index. The weighting-gap rebalancing algorithm progressively reduces the weighting gap between adjacent securities, as ranked by their raw weighting factors, on a proportional basis, until the weighting parameters specified above are met. The Index Provider may adjust the weights to account for liquidity, solar exposure, ownership, or diversification factors. The Index in addition follows an “80% investment policy” whereby at least 80% of the combined weight of the index constituents must be represented by companies that derive at least 50% of their revenues from the solar industry. Stocks with less than 50% solar revenue will either be dropped from the Index, not included in the Index, or have a weight adjustment to the extent necessary to comply with this policy.
If an Index constituent is determined to be delisted; illiquid; in bankruptcy or debt restructuring proceedings; acquired; or in extreme legal, regulatory or financial distress, that constituent may be removed from the index effective immediately and the stock will not be replaced. An Index constituent that is under a trading halt or suspension will be reviewed on an ongoing basis for possible deletion. A spin-off from an existing Index constituent will automatically be included in the Index if it meets the standard Index criteria but will be dropped from the Index as soon as is reasonably practicable if the spun-off company does not meet the standard Index constituent criteria.
A company that recently completed an initial public offering (“IPO”) and that meets the criteria above can be considered for inclusion as an Index constituent only at the time of the quarterly Index rebalance, and only after the security has completed at least two (2) months of trading history.
Except in unusual circumstances (including, but not limited to, mergers, spin-offs, delisting, tender offers, or the acquisition or bankruptcy of a company), the Index will be rebalanced quarterly on the third Friday of the last month of each calendar quarter, with a reference date for the data being the first business day of the last month of the calendar quarter. At the quarterly Index rebalance:
- securities may be added or deleted as Index constituents according to the criteria defined above,
- the Exposure Factor may be changed based on a shift in a company’s relative exposure to the solar industry, and
- constituent weightings may be adjusted to reflect a change in the Exposure Factor for a particular stock, the addition or deletion of Index constituents and/or the need to meet the specified weighting requirements.