Fresh from debuting a new index tracking the performance of pure play environmental technology companies last week, FTSE Group has confirmed that a major European pension fund has agreed to use the index as a benchmark for its green investments.

A FTSE spokeswoman said that the AP 7 Swedish national pension fund had selected the ET50 Index as it represents "the only index to measure the performance of energy efficiency and water and waste management technology companies, as well as alternative energy firms".

She added the FTSE expected further interest in the index as investment firms seek ways to better track the performance of their green investments against the rest of the market.

The ET50 Index has been developed by FTSE Group and environmental investment manager Impax and incorporates the fifty largest pure play environmental technology firms by market capitalisation worldwide.

Alternative energy and energy efficiency firms make up over two thirds of the index with water technology and pollution controls accounting for 15 per cent and waste technologies and resource management 17 per cent. Companies featured include Danish wind turbine giant Vestas, leading solar technology providers Suntech, First Solar and Q-Cells, and bio-science giant Novozymes.

The launch represents the latest in a line of new green investment indices to be launched in the last year. Merrill Lynch unveiled an Energy Efficiency index last summer to track 40 companies expected to profit from demand for improved energy efficiency, while Barclays Capital launched a carbon index for tracking the performance of the global carbon market.

FTSE Group itself also updated its criteria for assessing firms in its FTSE4Good CSR index last year to better assess their strategies for tackling climate change.