Dow Jones Sustainability World Index Definition

What Is the Dow Jones Sustainability World Index?

The Dow Jones Sustainability World Index, or DJSI World, is a world index consisting of the highest 10% of the biggest 2,500 shares within the S&P International Broad Market Index primarily based on their sustainability and environmental practices. The index was launched on Sept. 8, 1999, and is maintained by S&P Dow Jones Indices at the side of RobecoSAM, a Zurich-based funding specialist that conducts detailed sustainability analysis on hundreds of worldwide market capitalization leaders annually.

Understanding the Dow Jones Sustainability World Index

The Dow Jones Sustainability World Index (W1SGI) is an element of a bigger household of Dow Jones Sustainability Indices (DJSI) that launched in 1999 as the primary world sustainability benchmark. The household of indices contains DJSI World counterparts particular to North America, Europe, Asia Pacific, Korea, Australia, Chile, and rising markets.

DJSI World covers dozens of {industry} teams and has members in additional than 20 nations. Due to elevated investor urge for food for socially aware investments and company environmental accountability, the index has been licensed by many non-public wealth managers to make use of as a benchmark and has billions of property underneath administration pegged to it.

As of Might 31, 2022, a number of the index’s high 10 constituents by weight included Microsoft Corp, Alphabet Inc., Unitedhealth Group Inc., Taiwan Semiconductor Manufacturing Co Ltd., and AbbVie Inc. Many firms that develop into members of the index see it as a chance to reinforce shareholder consciousness of environmental efforts and can situation press releases to announce their index membership and tout their environmental sustainability management.

DJSI World Traits and Methodology

DJSI World, in June 2022, reported 325 constituents and five-year annualized internet complete returns of 9.69%. About 50% of the benchmark’s weight by market capitalization was concentrated in firms primarily based in the US, of which there have been 61. The sector breakdown confirmed that 25% of the businesses listed within the DJSI World have been well being care firms. The second highest sector was data expertise firms at 24.6% and financials got here in third with 12.2%.

About 47% of the benchmark’s weight by market capitalization was concentrated in firms primarily based in the US, of which there have been 59. The sector breakdown confirmed that 25.3% of the businesses listed within the DJSI World have been data expertise firms. The second highest sector was well being care at 21.3% and financials got here in third with 12.3%.

By way of environmental, social, and governance (ESG) disclosures, the index reported a carbon footprint (measured in metric tons of CO2 emissions per $1 million invested) about 54.3% higher than the broader S&P International BMI, the index from which DJSI World attracts its constituents. Fossil gasoline reserve emissions averaged practically 439.33% of these reported for the S&P International BMI, and DJSI World additionally fared higher when it comes to carbon effectivity.

The index is weighted primarily based on free-float market capitalization, and modifications are made as soon as annually in September primarily based on up to date sustainability scores. Every firm represented within the index has its company sustainability assessed by means of an intricate weighting system that appears at financial, environmental, and social metrics. Candidate companies are additional assessed primarily based on media and stakeholder commentary and industry-specific standards.

Particular Concerns

Corporations listed within the DJSI World are reevaluated annually. The scoring course of begins in March, with new scores launched in September. These firms that fail to point out constant progress could also be faraway from the index. Corporations may additionally be deleted between annual opinions if the index committee determines the corporate will not be behaving in accordance with sustainability pointers. An organization could also be excluded from the index primarily based on quite a lot of moral exclusions, together with its publicity to alcohol, playing, tobacco, armaments, firearms, nuclear energy, nuclear weapons, and grownup leisure.

The index committee additionally opinions information tales for every firm’s involvement with ESG points which may harm the corporate’s fame and core enterprise. These embrace a variety of points akin to human rights points, labor disputes, office security, unlawful business practices, fraud, and environmental disasters.