Constructing an Index for Sustainable Energy Investments

As an investment analyst, you are tasked with developing an index for a passive equity investment strategy that focuses on the sustainable energy sector. Your index must reflect the performance of publicly traded companies engaged in renewable energy production, energy efficiency, and related technologies.

Discuss the key considerations in constructing this index, including criteria for selecting companies, weighting methodologies, and any potential challenges related to liquidity and market representation. Additionally, recommend specific types of companies or industries that should be included in this index and justify your selections.