DJSI: definition and goals
The family was launched in 1999 and was created jointly by Standard and Poor’s Dow Jones Indices and RobecoSAM, combining the experience of an index provider and a sustainability investment expert. RobecoSAM is indeed an investment boutique focused exclusively on sustainability investing.
The DJSI index family offers investors a profile similar to S&P Global LargeMidCap Index in terms of risk and financial performance, integrating a higher sustainability consideration and giving higher exposure to sustainable companies.
The Dow Jones Sustainability Index family comprises global, regional, and country benchmarks as shown in the following list: DJSI World, DJSI North America, DJSI Europe, DJSI Asia Pacific, DJSI Emerging Markets, DJSI Korea, DJSI Australia, DJSI Chile, DJSI MILA Pacific Alliance.
DJSI exclusion criteria
For investors who wish to limit their exposure
to controversial activities, RobecoSAM and S&P Dow Jones Indices also offer
the DJSI Indices with exclusion criteria such as Armaments & Firearms,
Alcohol, Tobacco, Gambling and Adult Entertainment.
S&P ESG Sovreign Bond index family offers investors exposure to the same sovereign bonds as standard cap-weighted sovereign bond indices but directing attention to more sustainable countries based on RobecoSAM’s country sustainability ranking.
S&P Fossil Fuel Free index family comprises companies in the S&P Global 1200 Index and its regional subsets that do not own fossil fuel reserves. It overweights and underweights companies considering their level of carbon emissions.
S&P ESG Factor Weighted index family tracks the same companies as the underlying benchmark index family but takes into account ESG profile instead of free-float market-cap weights. The scores regarding ESG performance are based on RobecoSAM’s Smart ESG methodology. It is the first global index family to use ESG as a performance factor for smart beta indices.
Multi-factor indices take into account ESG performance and other common factors: low volatility, dividend yield, value or momentum, high beta, growth, quality.
RobecoSAM sustainability assessment
S&P ESG Sovreign Bond index family offers investors exposure to the same sovereign bonds as standard cap-weighted sovereign bond indices but directing attention to more sustainable countries based on RobecoSAM’s country sustainability ranking.
S&P Fossil Fuel Free index family comprises companies in the S&P Global 1200 Index and its regional subsets that do not own fossil fuel reserves. It overweights and underweights companies considering their level of carbon emissions.
S&P ESG Factor Weighted index family tracks the same companies as the underlying benchmark index family but takes into account ESG profile instead of free-float market-cap weights. The scores regarding ESG performance are based on RobecoSAM’s Smart ESG methodology. It is the first global index family to use ESG as a performance factor for smart beta indices.
Multi-factor indices take into account ESG performance and other common factors: low volatility, dividend yield, value or momentum, high beta, growth, quality.
RobecoSAM sustainability assessment
The choice of the companies or states included in
the indices is based on RobecoSAM sustainability assessment.
Corporate sustainability is a
business approach that creates long-term shareholder value by valorising and
taking into account risks deriving from ESG issues. The corporations are valued
with a Corporate Sustainability Assessment that focuses its attention on
sustainability performance. The focus on sustainability is based on two guiding
principles: first, sustainability practices are fundamental to create long term
shareholder value in a world with resource constraints; second, sustainability
factors represent opportunities and risks that competitive companies must
address. Long term challenges such as resource scarcity and climate change are
redefining societal expectations and policies of regulators which influence
investment results. Companies that address sustainability issues and risks are
considered more likely to create long term shareholder value and therefore to
have a good performance in terms of investments and a competitive advantage
that will make them emerge as leaders in their industry.
In RobecoSAM CSA the world’s largest 2500
publicly traded companies are invited to participate to the assessment in order
to be included in the index. Moreover, additional companies are invited to
participate for the growing regions or country specific indices, with a total
of 3400 invited companies. 60 industries are analysed using industry specific
questionnaire, without any exclusion of industries from the assessment. Companies
are evaluated based on ESG criteria and receive a score between 0 and 100 and
ranked according to their score. The top 10% companies of each industry are
included in the indices.
The first step is the focus on financial
materiality that focuses on specific industry value drivers that contribute to
industry performance. Each factor is analysed and ranked according to the
magnitude and likelihood of its impact on the company’s business value drivers
and financial performance over time. Those factors that are considered to have
the greatest impact on the long-term financial assumptions are given the
highest weighting in the CSA, and those factors that rarely impact the
financial cases either receive a much lower weight or are not included
in the CSA.
The CSA is a structured assessment that starts
with an industry specific questionnaire in which each question receives a score
from 0 to 100, the scores summing overall to 100. For relevant criteria a Media
and Shareholder Analysis impact is applied using an MSA multiplier calculation,
that can significantly reduce the criterion score. Each criterion is assigned a
predefined weight out of the total questionnaire. Criteria weights within each dimension
roll up to the total dimension weight. Each dimension weight is the sum of the
criterion weight within the respective dimension. Then a total score is determined,
the maximum being 100.
The index is therefore an important benchmark
that represents a cornerstone for investors that understood that sustainability
issues are crucial and want to include in their investment world companies and
states that give a substantial importance to ESG factors, thus assuring a long-term
perspective of value creation and enhancement.
Written by Giulia Galli
Sources: Financial
Times, The Economist, RobecoSAM website