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Contributors
Mona Naqvi
Senior Director
ESG Indices
S&P Dow Jones Indices
Manjit Jus
Head of ESG Ratings
RobecoSAM
Discover Material Insights with S&P DJI ESG Data 1. INTRODUCTION
A quarter of all professionally managed assets now incorporate
environmental, social, and governance (ESG) considerations,1 from the
impact of climate change to equality and human rights. The rich history of
S&P Dow Jones Indices (S&P DJI) in this area began in 1999 by pioneering
ESG indexing with the launch of the Dow Jones Sustainability Index (DJSI),
which marks its 20th anniversary in 2019.
S&P DJI continues to lead sustainable indexing solutions with a suite of
more than 150 headline ESG benchmarks, shaping the sustainable
investing landscape. The industry has changed considerably over the past
20 years, from a focus on sector exclusions borne out of the socially
responsible investment (SRI) movement, to more nuanced approaches to
broad market ownership that reweight based on company performance on
ESG. These are largely driven by the improved availability and quality of
ESG data, amplified by the launch of S&P DJI ESG Scores—a rigorous
new ESG dataset cultivated over 20 years of sustainable investment
experience by our partner, RobecoSAM (through its SAM2 brand), that are
now available to the market for the first time.
Exhibit 1.1: A Long History of ESG Indexing
Source: S&P Dow Jones Indices LLC. Chart is provided for illustrative purposes.
1 Kell, Georg. “The Remarkable Rise of ESG.” Forbes. July 11, 2018.
2 SAM is a registered trademark of RobecoSAM AG. SAM is used to market services and products of a business unit within RobecoSAM, which specializes in providing ESG data, ESG rating services, and ESG benchmarking. SAM is not to be considered as a separate legal entity.
Register to receive our latest research, education, and commentary at go.spdji.com/SignUp.
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2. A NEW ERA FOR ESG INDEXING
Since S&P DJI and SAM joined forces to launch the DJSI in 1999, the
index has become the global standard for corporate sustainability
performance. It serves as a reference point for thousands of firms looking
to improve their sustainability practices and benchmark themselves against
their peers. The DJSI is well respected among corporations and investors
alike, and it is built upon one of the most established databases of
corporate sustainability information in the world. The underlying scores
used in its calculation have now been redesigned to reflect the needs of a
broader group of investors, available for the first time with the launch of
S&P DJI ESG Scores.
This coincides with the launch of a global suite of S&P ESG Indices,
including the flagship S&P 500® ESG Index, driven by the new scores.3
These indices target the top 75% of ESG-ranked companies by market cap
within industry groups, whose weights remain unchanged. As such, these
indices offer sustainable alternatives to traditional broad market
benchmarks with similar risk and return profiles and low tracking errors.
From traditional best-in-class approaches like the DJSI to mainstream
strategies for integrating ESG across broad market benchmarks, S&P DJI
offers a variety of ESG index solutions to accommodate diverse ESG
objectives for almost every type of investor.4
Exhibit 2.1: S&P DJI ESG Indices
CATEGORY DESCRIPTION EXAMPLES
Core
Best-in-class approaches like the DJSI that target the top 10% of ESG performers; and broad market approaches, like the S&P 500 ESG Index, designed to closely track the benchmark with similar risk/return profiles.
• S&P ESG Indices • Dow Jones Sustainability Index
(DJSI) Series • S&P 500 Ex-Tobacco
Climate
Designed to address the risks and opportunities stemming from climate change and the low-carbon transition through carbon reduction objectives, fossil-fuel free strategies, and forward-looking approaches aligned with the recommendations of the Task Force for Climate-related Financial Disclosures (TCFD).
• S&P Global Carbon Efficient Indices
• S&P Global 1200 Fossil Fuel Free Indices
• S&P Carbon Price Risk 2030 Adjusted Indices
Thematic Indices that focus on specific ESG issues, often with a relatively narrow sustainability objective.
• S&P Long-Term Value Creation (LTVC) Indices
• S&P Global Clean Energy Indices • S&P/Drucker Institute Corporate
Effectiveness Index • Dow Jones Green REIT Indices
Fixed Income
Fixed income variants and a suite of indices providing access to the green bond market.
• S&P Green Bond Indices • S&P 500 Bond Investment Grade
Carbon Efficient Index
Source: S&P Dow Jones Indices LLC. Table is provided for illustrative purposes.
3 For more information, please see: “The S&P ESG Indices: Integrating Environmental, Social, and Governance Values into the Core.”
4 See Appendix A for performance charts highlighting the performance of the S&P 500 ESG Index against the S&P 500 since 2010.
While most ESG scoring methodologies reward companies that merely disclose ESG issues, irrespective of how well the company manages them… …the SAM research process critically accounts for both transparency and performance on these matters.
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3. S&P DJI ESG DATA
S&P DJI ESG data provide some of the most comprehensive ESG metrics
available—giving investors the transparency and flexibility to drill down into
material, granular, and industry-specific criteria to inform their particular
needs. Exhibit 3.1 summarizes S&P DJI’s ESG data offering and
distinguishes it from others in the market.
Exhibit 3.1: Summary of S&P DJI ESG Indices and ESG Data
ESG Indices Since 1999
S&P DJI has one of the longest track records in the ESG benchmarking space, having pioneered ESG indexing with the world’s first ever global sustainability benchmark, the DJSI, in 1999. This long history affords S&P DJI an unparalleled level of historical insight into ESG indexing compared with more recent endeavors by other providers.
SAM ESG Ratings Coverage 7,000 (by 2020)
S&P DJI ESG Scores are currently available for 4,700 publicly listed companies (representing approximately 90% of global market capitalization), with coverage expanding to 7,000 companies by 2020 (representing approximately 95% of global market capitalization).
Data Points per Company Available for up to 27 Criteria (Built upon a Foundation of up to 1,000 Granular Data Points per Company)
S&P DJI ESG data are available at the aggregate score level, in addition to the three underlying environmental, social, and governance dimensions, and further accessible up to as many as 27 industry-specific criteria per company. Each of these levels of company ESG data are available for investors to use and derive meaningful signals, with full transparency and flexibility to manipulate the metrics to inform their own investment process. All of the above rests upon a solid foundation of 80-120 question-level scores and a further 600-1,000 granular data points for every company assessed.
Transparency versus Performance
Performance and Transparency
While many ESG datasets rely solely on company reporting and thus reward companies that simply disclose ESG issues—irrespective of how well a company manages its performance on these matters—S&P DJI ESG Scores critically account for both transparency and performance. The S&P DJI ESG scoring methodology further rewards companies that disclose underreported sustainability topics that are of growing importance to investors and the rapidly evolving ESG landscape.
Integrates Controversies Yes
S&P DJI ESG Scores are dynamic, accounting for the evolving landscape of ESG issues with up-to-date annual assessments and ongoing monitoring of company controversies through its Media & Stakeholder Analysis (MSA).
Data Collection Method Direct Company Engagement plus Public Disclosure via Corporate Sustainability Assessment (CSA)
S&P DJI ESG Scores benefit from one of the only ESG data collection processes to go beyond simply collecting information from public disclosures, by engaging with companies directly through the annual CSA. With direct and targeted company access, the CSA can capture a much broader range of sustainability topics at a much more granular level than public reporting, for a robust and comprehensive assessment of company ESG performance.
Source: RobecoSAM and S&P Dow Jones Indices LLC. Table is provided for illustrative purposes.
S&P DJI ESG data provide some of the most comprehensive ESG metrics available today… …giving investors the opportunity to drill down into material, granular, and industry-specific criteria
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4. MORE THAN JUST PUBLIC DISCLOSURE
For decades, SAM has engaged companies directly through its annual
Corporate Sustainability Assessment (CSA) to gain unparalleled insight into
company sustainability. The CSA assesses 4,800 companies within 61
industries5 through customized questionnaires that focus on the most
material and relevant ESG issues. Where possible, the CSA relies on
primary data provided by companies directly through the survey. It need
not rely entirely on public disclosures. Nor does the CSA simply measure
the transparency and completeness of company reporting. While most
datasets reward companies that merely disclose ESG issues, irrespective
of how well the company manages them, the SAM research process
critically accounts for both company transparency and performance on
these matters. For any company that does not respond, an expert team of
analysts collects public information and fills out the CSA on its behalf to
ensure there are no data gaps for reliable index and portfolio construction
through a tried and tested framework.
5. RAISING THE BAR ON ESG
Since SAM issued the first CSA in 1999, sustainability topics have evolved
and investor expectations have risen. To stay current, CSA topics are
reviewed annually and the methodology is adjusted as needed. By
engaging companies directly, the CSA is uniquely positioned to reflect
upcoming or underreported sustainability topics that are of growing
importance to investors. Indeed, SAM frequently challenges companies on
emerging topics that may become part of upcoming regulatory changes,
reporting guidelines, or the broader conversation. For instance, the CSA
first explored company tax strategies in 2014, just as this matter was
becoming a contentious issue in corporate responsibility circles and before
companies had started to disclose on it (see Exhibit 5.1).
Thus, while most ESG scores rely solely on public information that can be
patchy and suffer from time lags, the CSA process gives a deeper and
time-sensitive review of how companies are managing issues in line with
the rapidly evolving ESG landscape. It is often the first time a company is
asked about a certain topic, spurring a conversation within the company
that could lead to a change in its policies or public reporting.
5 SPDJI ESG scores currently cover roughly 4,800 publicly listed companies, representing approximately 90% of global market cap.
Coverage is expanding to 7,000 (representing approximately 95% of global market cap) by 2020.
SAM engages with companies directly through its annual CSA… …which enables it to gain an unparalleled level insight into corporate sustainability performance. Since 1999, sustainability topics have changed considerably… …as companies strive to improve their practices and investor expectations are rising.
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Exhibit 5.1: Topics Assessed by SAM Prior to Becoming the Focus of Mainstream ESG Investors
TOPIC INCORPORATED INTO
THE CSA SINCE INVESTOR DEVELOPMENT
Human Capital Development
2002 The Human Capital Management Coalition, established in 2017, now includes 25 asset owners covering USD 2.8 trillion of assets.6
Human Rights 2002 Human Rights became a top ESG criterion for money managers in 2018, representing USD 2.2 trillion of assets.7
Climate Strategy 2013
The TCFD published recommendations in 2017 for climate-related financial disclosures. The initiative has the support of over 100 C-level professionals, corporations, financial institutions, stock exchanges, rating agencies, and index providers.8
Tax Transparency
2014 The UN Principles for Responsible Investment guide published in 2018 recommended evaluating and engaging on corporate tax strategy.9
Policy Influence
2017 Evidence emerged in 2018 that this was becoming a top shareholder concern, due to a filing by 74 institutional investors aimed at 50 U.S. companies.10
Source: RobecoSAM. Table is provided for illustrative purposes.
6. AN INDUSTRY-SPECIFIC APPROACH
Once a company’s assessment is complete, SAM calculates scores using
predefined weighting schemes driven by the financial materiality of topics
within specific industries (see Exhibit 6.1). Built upon a solid foundation of
600-1,000 data points per company, up to 120 question-level scores are
calculated for companies’ responses to each CSA question. These scores
are aggregated to as many as 27 industry-specific criteria, and three
environmental (E), social (S), and governance (G) dimensions before rolling
up into the headline ESG score (see Exhibit 6.2). This entire process is
prescribed by the materiality-driven weighting scheme for each industry.
For instance, cybersecurity may matter more in the IT Services industry
than in Metals & Mining, and vice versa for Waste Management. The
concept of materiality here is not only defined by risk exposure, but also by
the relevance of financial outcomes. These weights have been crafted
through the lens of a real-life investment process rather than an arbitrary or
theoretical approach to selecting the most material issues within each
sector. However, because investor opinions may differ when it comes to
the relative importance of E, S, and G issues, the data are available down
to the underlying criteria for investors to manipulate as needed for their
investment process.
6 Human Capital Management Coalition. UAW Retiree Medical Benefits Trust. http://uawtrust.org/hcmc.
7 www.ussif.org.
8 For more information, see the Final Report: Recommendations of the Task Force on Climate-related Financial Disclosures (June 2017).
9 Source: UN Principles for Responsible Investment. “EVALUATING AND ENGAGING ON CORPORATE TAX TRANSPARENCY: AN INVESTOR GUIDE.” May 17, 2018. https://www.unpri.org/esg-issues/governance-issues/tax-avoidance.
10 Source: Pensions & Investments. “Investor coalition files proposals at 50-plus companies on lobbying activities.” March 9, 2018. https://www.pionline.com/article/20180309/ONLINE/180309806/investor-coalition-files-proposals-at-50-plus-companies-on-lobbying-activities.
Once a company’s CSA is complete, SAM calculates scores using predefined weighting schemes… …which are driven by the financial materiality of topics within specific industries.
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Exhibit 6.1: Example of the Industry-Specific Approaches to Criteria and ESG Score Weights
Source: RobecoSAM. Chart is provided for illustrative purposes.
Exhibit 6.2: Illustrative S&P DJI ESG Score Pyramid
Source: S&P Dow Jones Indices LLC and RobecoSAM. Chart is provided for illustrative purposes.
7. A FINANCIALLY MATERIAL LENS ON ESG
RobecoSAM defines a financially material topic as “any factor which may
have a present or future impact on a company’s value drivers, competitive
positioning and, therefore, its ability to create long-term value for its
shareholders.” While hundreds of possible criteria might affect a
company’s sustainability, only a few critical issues will determine the
success of its future business model. However, such highly material
factors vary significantly among industries (see Exhibit 6.1). For this
reason, the CSA comprises both industry-specific questions—for example,
RobecoSAM defines a financially material topic as “any factor which may have a present or future impact on a company’s value drivers, competitive positioning, and… …therefore, its ability to create long-term value for its shareholders.”
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those regarding financial inclusion for Financials—and generic ESG
questions that are deemed relevant for all industries, such as those related
to corporate governance, risk management, or business ethics . To
determine the industry-specific portion of the CSA, SAM calculates the
most financially material factors using an industry materiality matrix like the
one for the Pharmaceuticals industry shown in Exhibit 7.1.
Exhibit 7.1: Example of Industry-Specific Materiality Matrix – Pharmaceuticals Industry
Source: RobecoSAM. Chart is provided for illustrative purposes.
8. MEASURING INTANGIBLES
A key consideration throughout the CSA is how different forms of capital
can affect financial performance. In other words, to what extent can
intangible assets such as human capital or social capital influence financial
performance through stronger growth, better profit margins, or fewer
business risks? Our data consider the extent to which these assets are
influenced by ESG issues and whether such channels give a comparative
advantage to certain companies relative to their peers.
Some questions considered throughout this process are demonstrated in
Exhibit 8.1. Continuing with the example of Pharmaceuticals, company
value may be driven by innovation and access to patients, while the
industry may face megatrends such as demographic and pandemic trends,
rising healthcare costs, and diminishing patient trust in providers. The
intangible assets that affect long-term value might include innovation
management, market access strategy or management, and business ethics
(see Exhibit 8.1). Possible key performance indicators to assess the value
of these types of assets could be levels of research & development
productivity, pipeline workflow, history of product recalls, and customer
satisfaction. As a result, the industry-specific portion of the
Pharmaceuticals CSA would likely focus on these types of metrics for a
material assessment of company sustainability.
To what extent can intangible assets influence financial performance… …through stronger growth, better profit margins, or fewer business risks?
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Exhibit 8.1: Defining Financially Material ESG Information
Source: RobecoSAM. Chart is provided for illustrative purposes.
Exhibit 8.2: How Do Intangible Assets Affect Financial Performance?
Source: RobecoSAM. Chart is provided for illustrative purposes.
9. UNPICKING SIGNALS FROM REAL INVESTMENT
EXPERIENCE
RobecoSAM integrates both sustainability and financial data in its valuation
models. In practice, this means looking beyond tangible or physical assets
and considering how ESG criteria could affect the value of intangibles and
financial metrics (see Exhibit 8.2). Putting a monetary value on
intangibles—an increasing component of company value11—lies at the
heart of ESG. Once the effects of sustainability criteria are incorporated in
this way, analysts can approximate long-run company value through holistic
fair value estimates (see Exhibits 9.1 and 9.2 for an illustration of this
research). The SAM CSA methodology thus benefits from decades of
integrated valuation analysis and investment performance by RobecoSAM
to back-test and identify the most relevant issues within industries.
11 According to Ocean Tomo (2015), more than 80% of corporate value reflected in the S&P 500 was driven by tangible assets in 1975, while
intangible assets accounted for less than 20% of the value. By 2015, these figures had reversed with intangible assets accounting for 87% of the value of companies in the S&P 500, while tangible assets accounted for the remaining 13% of corporate value in the index. See chart in Appendix D for more information.
RobecoSAM integrates sustainability factors and financial data in financial valuation models to arrive at holistic fair value estimates for companies. In practice, this means looking beyond tangible or physical assets and considering how ESG criteria may affect the value of intangibles and financial metrics.
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Exhibit 9.1: RobecoSAM’s Approach to Integrating Sustainability Criteria into Valuation
Source: RobecoSAM. Chart is provided for illustrative purposes.
Exhibit 9.2: Illustrative Integrated Valuation Analysis of an Internet Services & Infrastructure Company
Source: RobecoSAM. Table is provided for illustrative purposes.
10. REAL-TIME ANALYSIS OF COMPANY CONTROVERSIES
S&P DJI ESG Scores are dynamic, responding to the evolving ESG
landscape with up-to-date annual assessments and ongoing monitoring of
controversies. Although the CSA is annual (see Exhibit 10.1), through
SAM’s partner RepRisk, a leading provider of ESG intelligence, information
is collected from print and online media, government bodies, regulators,
think tanks, and other sources through its daily Media and Stakeholder
Analysis (MSA).12 It identifies incidents that could have a damaging and
lasting effect on companies’ reputations, financial circumstances, or
business models. MSA cases cover topics such as crime, corruption,
fraud, illegal commercial practices, human rights abuses, labor disputes,
workplace safety, catastrophic accidents, and environmental violations.
An MSA case is created if: (1) a company is seen to bear some
responsibility for a specific negative event; (2) the incident reveals that the
company’s actions are inconsistent with its stated policies and goals, or it
12 The MSA is performed daily using stories compiled and pre-screened by RepRisk, a business intelligence provider specialized in ESG.
S&P DJI ESG Scores are dynamic, accounting for the evolving landscape of ESG issues… …with up-to-date annual assessments and ongoing monitoring of company controversies.
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exposes a failure of company management or processes; and (3) it meets a
condition of materiality, meaning there is potential for reputational and
financial damages through loss of customers, exposure to liabilities,
litigation and fines, or the disruption of operations. Depending on the
severity, SAM may downwardly adjust a company’s criteria-level scores
under the E, S, or G dimensions. However, an MSA will only affect a
company’s headline ESG score to the extent that the criteria involved are
sufficiently material and weighted within that industry.
Exhibit 10.1: Annual CSA Cycle with Continuous Analysis of Company Controversies
Source: RobecoSAM. Chart is provided for illustrative purposes.
11. A RIGOROUS DATA COLLECTION PROCESS
The SAM CSA methodology applies robust quality control and data
verification processes to information provided by companies or collected by
analysts. For more than 20 years, a cornerstone of the CSA has been a
rigorous set of guidelines, on which SAM analysts and data scientists are
thoroughly trained. This ensures all data are scrutinized using the same
high-quality standards. The guidelines are frequently updated as
expectations around best practice, reporting standards, or legal
requirements changes, and they are automatically enforced through inbuilt,
mandatory checks in a state-of-the-art, purpose-built software platform
used by companies and analysts to interface directly (see Exhibit 11.1).
The platform requires company submissions to be backed by evidence,
supporting documentation, and substantiated with real-life examples, which
are then scrutinized by an expert team of analysts and crosschecked with
statistical analysts for further verification. The high-tech platform also
facilitates real-time, direct conversation between analysts and companies if
further clarification is needed. The process and results are subject to an
annual third-party audit by a leading, independent audit firm to ensure a
consistent and rules-based application of the methodology.13
13 CSA is annually audited by Deloitte.
The ongoing MSA collects information that could have a damaging effect on companies’ reputations, financial circumstances, or business models.
The SAM CSA methodology applies robust quality control and data verification processes to all information provided by companies or collected by analysts.
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Exhibit 11.1: The SAM Software Platform Used to Interface with Companies
Source: RobecoSAM. Chart is provided for illustrative purposes.
12. HOW THE SCORES HAVE EVOLVED
To reflect the needs of a broader group of investors, S&P DJI ESG Scores
offer a new variant of the SAM ESG data (see Exhibit 12.1). The CSA is
updated every year to reflect current trends in the fast-moving ESG
landscape. However, the SAM ESG data used in the calculation of the
DJSI have never before been brought to market for use outside of the
RobecoSAM investment process since it was created in 1999. Appendix C
summarizes the key similarities and differences of the two methodologies.
The main differences are in how unanswered questions are treated.
To compete for one of the top spots in the DJSI and within their respective
industry, over 1,000 companies spend a significant amount of time and
resources on completing the CSA each year. Inclusion in the DJSI is seen
as a badge of honor for global sustainability champions, and many
companies make responding to the CSA a priority. In the DJSI ESG data
methodology, a company receives zero points for any questions it fails to
respond to. However, to create an impartial dataset for broad market ESG
benchmark construction, as with the S&P 500 ESG Index, the data must
avoid self-selection and response bias. Companies ought to be assessed
and considered for inclusion in the index whether they respond to the CSA
or not, so long as they meet the eligibility criteria. With the new S&P DJI
With the S&P DJI ESG Scores, a company is only penalized if more than half of its peers have disclosed the relevant information and it has not.
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ESG Scores, a company is only penalized if more than half of its peers
have either responded with or disclosed the relevant information where it
has not. This helps to gauge whether a company is lagging behind the rest
of its industry on ESG. So while SAM ESG Scores are especially useful for
companies to benchmark themselves against their peers on absolute
performance on ESG topics, S&P DJI ESG Scores are more suitable for
broad investment portfolio and index construction.
Exhibit 12.1: Example S&P DJI Scores for S&P Global from SPICE Platform
Source: S&P Dow Jones Indices LLC. Data as of Sept. 13, 2019. Chart is provided for illustrative purposes.
13. HOW TO USE THE DATA
Investors integrate ESG considerations in different ways, including universe
selection, investment screening, best-in-class analysis, integrated company
valuation, optimizing, tilting, or reweighting a portfolio, as well as for simply
identifying and measuring exposures. New entrants may prefer to use
headline ESG scores to identify suitable investments, while seasoned ESG
investors might have their own views regarding the relevance of certain
sustainability criteria over others. It is not uncommon for investors to
consume and comingle multiple ESG data sources to create derived data
metrics and internal sustainability rankings within their investment universe.
As a result, demand appears to be growing for transparency and granularity
of ESG data for a variety of applications. As highlighted in Exhibit 6.2, we
offer a spectrum of ESG data points, from the headline score to as many as
27 industry-specific criteria, giving investors the flexibility to manipulate the
data or integrate them immediately “as is” for a turnkey ESG data solution.
Investors integrate ESG data in different ways including universe selection, investment screening, and optimizing, tilting, or reweighting a portfolio. S&P DJI offers a variety of ESG indices to accommodate diverse investment objectives… …but in all cases the methodology and objective of the indices are public and transparent.
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14. CONCLUSION
The sustainable investment industry has grown significantly in recent years,
in part driven by the better availability and quality of corporate sustainability
data. However, myriad standards, guidelines, and conventions around
ESG integration approaches, with occasionally conflicting objectives, can
sometimes lead to confusion among investors, particularly when it comes to
selecting an ESG index or data provider. To meet these needs, S&P DJI
offers a spectrum of ESG benchmarks for diverse investment and ESG
integration objectives, with fully transparent methodologies in all cases.
Our ESG data offering is also fully transparent and flexible to inform
individual investor needs. Unlike newer ESG datasets, S&P DJI ESG
Scores unleash more than two decades of sustainable investment decision-
making experience by world-renowned ESG experts, RobecoSAM. Driven
by one of the most robust and comprehensive surveys of corporate
sustainability performance in the world, the tried and tested S&P DJI ESG
data gives unparalleled insight into the most financially material and
relevant ESG issues for all industries.
We offer a spectrum of ESG data points from the headline score to as many as 27 individual criteria… …giving investors the transparency and flexibility to manipulate the data as they see fit, or integrate them immediately “as is” for a turnkey ESG data solution.
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APPENDIX A: Risk and Returns of the S&P 500 ESG Index
Exhibit A.1: Performance of the S&P 500 ESG Index and S&P 500
Exhibit A.2: Performance of the S&P 500 ESG Index and S&P 500
CATEGORY S&P 500 S&P 500 ESG INDEX
Five-Year Annualized Total Returns (%) 11.70 11.94
Five-Year Standard Deviation (%) 11.98 11.95
Five-Year Tracking Error (%) - 0.76
ESG Score Improvement (%) - 25.45
Source: S&P Dow Jones Indices LLC. Data as of Dec. 31, 2019. Index performance based on total returns in USD. Past performance is no guarantee of future results. Chart and table are provided for illustrative purposes and reflect hypothetical historical performance. Please see the Performance Disclosure at the end of this document for more information regarding the inherent limitations associated with back-tested performance.
-
50
100
150
200
250
300
350
400
Ap
ril 2010
Ap
ril 2011
Ap
ril 2012
Ap
ril 2013
Ap
ril 2014
Ap
ril 2015
Ap
ril 2016
Ap
ril 2017
Ap
ril 2018
Ap
ril 2019
Retu
rns
S&P 500 S&P 500 ESG Index
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APPENDIX B: MSA Methodology
Exhibit B.1: The Methodology of the MSA
Source: RobecoSAM. Chart is provided for illustrative purposes.
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APPENDIX C: Comparison of SAM ESG Scores and S&P DJI ESG Scores
Exhibit C.1: Comparison of SAM ESG Scores and S&P DJI ESG Scores
CATEGORY SAM ESG SCORES S&P DJI ESG SCORES
Underlying Research Methodology SAM CSA
Calculation Agent SAM
Review Frequency Annually (with quarterly controversy updates)
Data Collection Direct company participation through CSA or assessment of publicly available data by SAM analysts
Quality Assurance Detailed, multi-tiered quality control process according to SAM guidelines. Annual independent third-party assurance on research and quality control process
Company Controversy and Risk Screening
SAM MSA
Question Scoring Aggregation of data points by predefined CSA methodology. Unanswered questions are given a score of 0.
Aggregation of data points by predefined CSA methodology. Unanswered questions that are not mandatory are not scored. Unanswered mandatory questions are given a score of 0. Question-level scores are normalized within industry.
Question Weights Predefined industry CSA weights determined by SAM, based on financially materiality of sustainability factors to the specific industry
Criteria Scoring Question scores are aggregated to a criteria score.
Normalized question scores are aggregated to a criteria score. Weights of unanswered questions are redistributed among other questions within criteria, if they are not mandatory, to maintain criteria weights.
Criteria Weights Predefined industry CSA weights determined by SAM, based on financially materiality of sustainability factors to the specific industry.
Dimension Scoring Criteria scores are aggregated to a dimension score.
Criteria scores are aggregated to a dimension score. If all questions in a criteria are unanswered, the weight of the criteria is redistributed among other criteria within a dimension (environmental, social, or governance)
Dimension Weights Dimension weights are always preserved according to the original SAM weighting scheme, irrespective of how criteria questions are answered.
Total ESG Score Absolute score resulting from the weighted sum of all criteria and dimension scores.
Absolute score resulting from the weighted sum of all criteria and dimension scores. Relative total ESG score then calculated and normalized within each industry.
Score Type Absolute Relative (scores are normalized within assessed SAM industry).
Source: S&P Dow Jones Indices LLC and RobecoSAM. Table is provided for illustrative purposes.
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APPENDIX D: Measuring the Value of Intangibles
Exhibit D.1: Components of the S&P 500 Value
Source: Ocean Tomo, LLC. Data as of Jan. 1, 2015. Chart is provided for illustrative purposes.
17%32%
68%80% 87%
83%68%
32%20% 13%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
1975 1985 1995 2005 2015*
Weig
ht
Intangible Assets Tangible Assets
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INDEX EDUCATION | ESG 18
PERFORMANCE DISCLOSURE
The S&P 500 ESG Index was launched January 28, 2019. All information presented prior to an index’s Launch Date is hypothetical (back-tested), not actual performance. The back-test calculations are based on the same methodology that was in effect on the index Launch Date. However, when creating back-tested history for periods of market anomalies or other periods that do not reflect the general current market environment, index methodology rules may be relaxed to capture a large enough universe of securities to simulate the target market the index is designed to measure or strategy the index is designed to capture. For example, market capitalization and liquidity thresholds may be reduced. Complete index methodology details are available at www.spdji.com. Past performance of the Index is not an indication of future results. Prospective application of the methodology used to construct the Index may not result in performance commensurate with the back-test returns shown.
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