Nowadays there is a great variety of sustainability indexes. A list that has grown considerably in the last few years. Nonetheless, the ones that include a variety of environmental, social and governance factors (ESG) are the most prominent. The main sustainability indexes are the Dow Jones Sustainability Index and the FTSE4Good Index.
What are sustainability indexes?
Sustainability indices are the stock market indicators made up of companies listed on the stock market from around the world that accredit responsible management in accordance with their practices in different facets of sustainability and corporate responsibility.
To be part of these sustainability indices, a rigorous analysis and selection process is carried out to incorporate companies that make financial decisions based on environmental, social and governance (ESG) criteria.
That is why these indexes are a reference in the market for a large number of companies that are aware of the importance of sustainability.
| Sustainability stock indexes are indicators that select companies which combine economic success with sustainable development. |
The most recognized ones
The main sustainability indexes are the Dow Jones Sustainability Index and the FTSE4Good Index.
Dow Jones Sustainability Index
The Dow Jones Sustainability Index, also known by its acronym DJSI, was created in 1999 with the aim of recognizing the best sustainability practices of publicly traded companies.
This global index assesses the good practices of companies based on various environmental, social and economic criteria.
First of all, to be part of this index, companies must pass an analysis carried out by the company RobecoSAM. The analysis methodology focuses on three dimensions: economic, social and environmental, in which weighted weights are assigned based on the impact of each sector.
It covers about 600 indicators, through an extensive questionnaire (approximately 150 questions) all dimensions of the company are exhaustively reviewed: from its policies, codes of conduct, data on training, equity, salary tables, among others.
In this way, analysts rate companies from 1 to 100 and decide if they become part of the index.
In fact, globally, the 600 analysis points that make up the DJSI are considered among the most demanding.
| DJSI has become a key reference point for investors who are committed to sustainability criteria when making an investment. |
FTSE4Good Index
The FTSE4Good Sustainability Index belongs to the FTSE4Good family, from the global provider FTSE Russell, which is made up of different indices. FTSE4Good Index groups companies worldwide that have solid environmental, social and corporate governance (ESG) practices.
First, the evaluation is carried out based on the publicly available information of the companies on their environmental, social and corporate governance practices, giving credibility and transparency to the evaluation.
It includes more than 300 indicators on 14 different topics, grouped into the three aforementioned pillars: environmental, social, and corporate governance. Every six months the information is reviewed to update the indexes and include companies that improved their performance and transparency.
The companies that achieve the highest scores in the FTSE Russell assessment of companies listed on stock exchanges around the world are the companies included in the FTSE4Good index ranking.
| It may interest you: ESG criteria, what are they and why are they so relevant for investors? |
Other sustainability indexes
In addition to the Dow Jones Sustainability Index (DJSI) and the FTSE4Good Index, there are other international sustainability indexes such as:
- MSCI Global Sustainability Index
- CDP
- Euronext Vigeo Index Eurozone and Europe 120
- Ethibel Sustainability Excellence Europe and Global.
- STOXX Global ESG
First, these indexes are designed to help investors integrate environmental, social and governance criteria into their investment decisions.
However, another point in common among all is the search for a better future for society as a whole.
Advantages of belonging to sustainability indexes
Inclusion in indexes should improve:
What does the permanence and position in these indexes depend on?
The permanence and position in these stock indices depends on the demonstration of the constant progress in sustainability issues of the companies. They also influence the eligibility of such companies in investment portfolios.
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