S&P Dow Jones Indices is crafting an environmental, social and governance adaptation of the widely observed S&P 500 Index to meet increasing investment demand for impact investment products on U.S. stocks, and the exchange traded fund industry may be close behind with an offering to track the ESG-related benchmark.
In the months ahead, S&P DJI will roll out a global family suite of ESG-related indices based on its other widely tracked regional and country-specific large and mid-cap benchmarks used in the Americas; Europe, the Middle East and Africa (EMEA); and the Asia-Pacific (APAC) region, CNBC reports.
The new S&P 500 ESG Index (SPXESUP) will incorporate the risk and return of the S&P 500, a market-cap-weighted index of the 500-largest publicly traded companies in the U.S., while adding on environmental, social and governance criteria.
“We are excited to bring to market these innovative ESG indices and scores. Our philosophy as an independent index provider is to offer choice to investors,” Alex Matturri, CEO at S&P Dow Jones Indices, said.
“We will continue to contribute to the growth of sustainable finance and economies through our indices,” he added.
According to the ESG indexing methodology, the new index will exclude tobacco producers, makers of certain weapons and companies with a low score in relation to the United Nations Global Compact principles for responsible businesses. The screens will be based off ESG ratings providers Sustainalytics and Arabesque data.
S&P said it is also introducing a new range of ESG scores to be calculated by SAM, a unit of money-manager RobecoSAM that provides ESG data, ratings and benchmarks.
Looking ahead, S&P DJI said the new S&P 500 ESG Index will serve as a performance-tracking tool and a building block for new ESG index-related investment vehicles or passive investing solutions, like ETFs.
For more information on index-based ETFs, visit our indexing category.