S&P Dow Jones Indices (“S&P DJI”), the world’s leading index provider, announced the newest additions to its global Environmental, Social and Governance (ESG) index family. Drawing from two decades of pioneering ESG index innovation, this new set of indices provides performance profiles in line with several headline indices including the S&P Global 1200, Europe 350, S&P/ASX 200 and S&P Japan 500.
The new indices also include ESG versions of S&P DJI’s well-known country and regional large and midcap benchmarks covering the Americas, Europe, Middle East and Africa (EMEA) and Asia-Pacific (APAC). These global ESG indices use enhanced ESG Scores and granular data that underpin the methodology for company inclusions and exclusions.
“We’re excited to introduce this new series of ESG indices following the debut of the S&P 500 ESG Index and ESG Scores in April,” said Alex Matturri, Chief Executive Officer at S&P Dow Jones Indices. “Across the company, we are developing a portfolio of products that provide an ESG lens on investments, adding layers of insights for clients. These new indices provide market participants an investment tool that is aligned with their values and has a return profile that’s consistent with mainstream benchmarks that have been widely followed for years.”
The S&P DJI ESG Scores serve as the foundation for index constituent eligibility and selection. The ESG Scores are overseen by S&P DJI’s governance group and are calculated by SAM, a unit of RobecoSAM that specializes in producing ESG data. The S&P DJI ESG Scores are also available to market participants as a standalone tool for a broad range of research and investment purposes.
These global ESG indices follow eligibility criteria based on companies’ ESG Scores, business activities and the UN Global Compact (UNGC). The indices exclude companies that produce tobacco, have tobacco sales and tobacco-related products and services greater than 10% of their revenues. The indices also exclude companies involved in controversial weapons either directly or via an ownership stake of 25% or more of another company involved in these weapons.
Companies not aligned with the UNGC and that have poor UNGC scores are not included as well as those with S&P DJI ESG Scores in the bottom 25% of companies globally within their Global Industry Classification Standard (GICS) groups. The end result is an ESG index version whose risk and return profile is closely in line with that of its regional or country parent notwithstanding the various exclusions the methodology requires.
“We’re very proud of the thorough research and analytical rigor applied to the design of this family of core regional and country ESG indices,” said Reid Steadman, S&P DJI’s Global Head of ESG Indices. “While ESG has long been of great interest to investors, market participants are becoming increasingly sophisticated in integrating ESG factors into their
investments. Through our collaboration with SAM, we’ve developed an enhanced ESG scoring methodology that is purposely built for integration in our indices.”