S&P Dow Jones Indices (S&P DJI) has launched two new indices to help investors identify firms in the S&P 500 - comprising 500 large companies trading in United States stock markets - that have strong sustainability credentials.
The US financial index provider, which was formed from the merger of S&P Indices and Dow Jones Indexes, announced on June 24 the S&P Environmental & Socially Responsible Index and the S&P International Environmental & Socially Responsible Index.
An index measures the value of a portfolio of companies and tracks how they perform as a group. S&P DJI’s new indices are aimed at investors who are looking for greater exposure to companies that have sustainable practices.
Alka Banerjee, Managing Director at S&P Dow Jones Indices said more investors, including those which comply with the United Nations-backed Principles of Responsible Investment (PRI), want to see more environmentally and socially responsible companies in their investment portfolios.
The PRI is an initiative which supports investors who are committed to incorporate Environmental, Social and Governance (ESG) principles into their investment decisions.
“By drawing upon broad market, widely recognised indices like the S&P 500 and S&P Global BMI, we are able to offer the market a unique perspective on the performance of companies that have a strong profile in addressing environmental and social challenges,” explained Banerjee.
The eligible companies are assigned environmental and social (E&S) dimension scores provided by RobecoSAM, a financial management firm focused on sustainability investing. Seventy-five per cent of the companies with the highest E&S ranking will be selected for index membership, the firm explained.
The companies are measured against their “ability to adapt to sustainability trends such as resource scarcity, climate change, or an aging population”, it stated in the indices’s methodology document.
It will exclude companies that are involved in fossil fuel-heavy industries or in the production and sale of tobacco, cluster bombs, landmines, nuclear and other military armaments, it added.
The two indices are an addition to S&P DJI’s family of ESG indices and have been licensed to Goldman Sachs Asset Management, which worked with S&P DJI to develop the sustainability criteria.
Monali Vora, a managing director in Goldman Sachs Asset Management Quantitative Investment Strategies team, commented: “Our clients are increasingly interested in aligning their investments with their core values. That’s why we worked with S&P DJI to help them develop these environmental and socially responsible indices.”