Index provider S&P Dow Jones Indices has teamed up with sustainability investment specialists RobecoSAM to launch the Dow Jones Sustainability Emerging Markets Index (DJSI Emerging Markets).
S&P Dow Jones has teamed up with RobecoSAM to launch the Dow Jones Sustainability Emerging Markets Index.
The DJSI Emerging Markets offers investors a tool for measuring the performance of companies in emerging markets recognised as leaders compared to their peers in terms of corporate sustainability.
The index aims to represent approximately the top 10% of the largest 800 companies in 20 emerging markets based on long-term economic, environmental and social criteria, such as climate change strategies, energy consumption, human resources development, knowledge management, stakeholder relations and corporate governance.
The 20 emerging markets covered are Brazil, Chile, China, Colombia, the Czech Republic, Egypt, Hungary, India, Indonesia, Malaysia, Mexico, Morocco, Peru, the Philippines, Poland, Russia, South Africa, Taiwan, Thailand and Turkey.
Although much progress has been made in terms of political and economic stability, many companies in emerging markets continue to operate in challenging surroundings. The DJSI Emerging Markets seeks to identify corporate sustainability leaders by drawing on RobecoSAM’s extensive experience in measuring intangibles through the annual Corporate Sustainability Assessment (CSA).
In the emerging markets universe, only the companies whose Total Sustainability Score (a quantitative measure RobecoSAM assigns to each company) in the Corporate Sustainability Assessment, based on the company’s participation and/or publicly available information, ranks them among the top 10% in their sector are eligible for index inclusion.
Out of a total of 800 emerging market companies that were eligible to participate in the 2012 CSA, 69 were identified as sustainability leaders in their respective sector and selected for index membership. Stocks are then weighted according to float-adjusted market capitalisation, subject to a minimum market capitalisation of $500 million.
Guido Giese, Head of Indexes, RobecoSAM, said: “The steady increase in the number of emerging market companies that participate in our CSA shows that businesses around the world are embracing sustainable practices as an important factor in their future competitive position. As the emerging markets have come of age, demand for a regional benchmark for sustainability investors has increased and we can now offer an appropriate product.”
Alka Banerjee, Vice President of Global Equity Indices at S&P Dow Jones Indices, added: “An important strategic reference point for sustainability investors around the globe, the DJSI are continuously advanced to respond to market trends and requirements. The DJSI Emerging Markets, the first index of its kind in the market, is launched in response to the evolving needs of the global investment community.”
For UK and European investors seeking immediate access to equity markets via a sustainable approach, exchange-traded funds (ETFs) from iShares and UBS are worth a look.
The iShares ETFs are linked to indices from within the same Dow Jones Sustainability Indices family as the new DJSI Emerging Markets index, and therefore adhere to the same construction methodology. One slight difference is that they are based on sub-indices which also exclude companies operating in the alcohol, tobacco, gambling, armaments & firearms, and adult entertainment industries. The ETFs are listed on the London Stock Exchange, Deutsche Börse and NYSE Euronext Amsterdam.
iShares Dow Jones Global Sustainability Screened ETF (IGSG)
iShares Dow Jones Europe Sustainability Screened ETF (IESE)
The UBS ETFs follow regional sub-indices of the MSCI Global Socially Responsible Index. They comprise companies that maintain best-in-class Environmental, Social and Governance (ESG) standards. Like the iShares offering, these ETFs also explicitly exclude securities of companies involved in certain industries, namely nuclear power, tobacco, alcohol, gambling, military weapons, civilian firearms, genetically modified organisms and adult entertainment. The ETFs are listed on the London Stock Exchange, SIX Swiss Exchange, Deutsche Börse and Borsa Italiana.
UBS-ETF MSCI World Socially Responsible A (UC44)
UBS-ETF MSCI Europe & Middle East Socially Responsible A (UB39)
UBS-ETF MSCI North America Socially Responsible A (UC46)
UBS-ETF MSCI Pacific Socially Responsible A (UB45)
For US-based investors, the following are listed on the NYSE Arca:
Pax MSCI North America ESG Index ETF (NASI)
Pax MSCI EAFE ESG Index ETF (EAPS)
iShares MSCI KLD 400 Social Index ETF (DSI)
iShares MSCI USA ESG Select Social Index ETF (KLD)