Dow Jones Sustainability Index
Encyclopedia
Launched in September 1999, the Dow Jones Sustainability Indexes (DJSI) are a family of indexes evaluating the performance of the world’s leaders in sustainability. They are the longest-running global sustainability benchmarks worldwide and have become the key reference point in Sustainability Investing for investors and companies alike. The DJSI is managed cooperatively by Dow Jones Indexes
and Sustainable Asset Management.
The DJSI is based on an analysis of corporate economic, environmental and social performance, assessing issues such as corporate governance, risk management, branding, climate change mitigation, supply chain standards and labor practices. The trend is to reject companies that do not operate in a sustainable and ethical manner. It includes general as well as industry specific sustainability criteria for each of the 57 sectors defined according to the Industry Classification Benchmark (ICB).
The DJSI family contains one main global index, the DJSI World, and various indexes based on geographic regions such as: Europe, Nordic, North America and Asia Pacific. The DJSI also contains industry specific indexes called “blue chip indexes.” In addition, the DJSI methodology facilitates the design, development and delivery of customized sustainability indexes; e.g. indexes covering different regions, indexes covering different segments of the leading sustainability companies, indexes covering additional exclusion criteria and indexes denominated in different currencies.
To be incorporated in the Dow Jones Sustainability Index, companies are assessed and selected based on their long term economic, social and environmental asset management plans. Selection criteria evolve each year and companies must continue to make improvements to their long term sustainability plans in order to remain on the Index. Indexes are updated yearly and companies are monitored throughout the year.
The Dow Jones Sustainability Indexes have been divided into various benchmarks including the World, Europe, North America, Asia Pacific, Nordic, and Korean indexes.
Once a company is listed on the DJSI, it is monitored daily for any critical arising issues, which can lead to the exclusion of the company if deemed critical enough. Examples of events that would lead to exclusion include: commercial practices, human rights abuses, layoffs or worker disputes, or catastrophic disasters. These companies are monitored through publicly accessible information including media and company contact. If one of these critical events happens, the situation is analyzed for the scope in which it reaches. If large enough, the event will be analyzed further based on severity, media coverage, and crisis management. SAM analysts decide from here whether the company will be excluded from the DJSI. An assurance report is completed by Deloitte to ensure the validity of the company’s information.
In early 2009, an independent expert study commissioned by UNEP FI and presented at the World Economic Forum in Davos, highlighted the SAM assessment as “the most rigorous in terms of the number of questions and depth of information requested".
In 2009, SAM carried out its 11th consecutive [Corporate Sustainability Assessment], assessing more than 1,200 companies, an increase of 8% from 2008. At the onset of DJSI’s assessment criteria, SAM mainly focused on government compliance and regulations. It has evolved to embrace Corporate Sustainability as a key competitive advantage, taking into account nine specific criteria in addition to industry specific criteria. Below are the criteria and weightings SAM uses to assess a company’s overall score.
Note that these weightings are approximations, and actual weightings may differ between industries. A Breakdown of these Dimensions is seen below
Number of invited companies in 2010:
Some of the assessment criteria have varied slightly from year to year to reflect growing information about particular issues such as water related risks, brand management, corporate citizenship, risk and crisis management. Continuous improvement allows for SAM to provide both relevant and current information.
Since 1999, SAM’s Corporate Sustainability Assessment has increased in number of assessed companies, number of sectors, number of questions to companies, average totally sustainability score, and weight of sector-specific criteria in percentage total weight.
Included in the most recent SAM questionnaire are more difficult to measure intangible business attributes such as innovation and customer relationship management. Questions are both directed at short-term risks and opportunities and sustainable long-term value creation. The intensity of the industry-specific criteria has continuously increased. In 1999, industry-specific information accounted for only 30% of the overall score, while now it accounts for nearly 60%.
From these questionnaires, each company can be awarded one or a combination of the following status:.
Guidebook
Each year a new guidebook is published that covers all pertinent information from the preceding year. The format of each guidebook remains the same from year to year keeping changes and referencing consistent. The guidebook is the main source of information concerning everything about the indexes and about the companies who are being evaluated with these indexes. The subjects covered in each region's guidebook are as follows:
These sections allow for a full understanding of the basic principles of the Dow Jones Sustainability Index while also keeping an updated account of the changes that have occurred within the preceding year and the new indexes that have been published for each region.
Factsheets
Factsheets have each region of the Indexes broken down into their corresponding subsets rather than their overall area. This allows for more ease of referencing and provides specific detailed facts about the data found in each sub region. The fact sheets serve as a more condensed form the guidebook in that the fact sheets lack the background information and the reasoning and descriptions behind the changes that occur each year.
Presentations
Each year, the DJSI creates a more user-friendly version of the guidebook by creating a presentation of each years indexes. Also included is the background information for each region and the selection process and reasoning involving in evaluating and choosing the sustainable corporations included in the index.
Brochure
On the 10-year anniversary of the founding of DJSI, the DJSI along with their collaborator in Sustainable Asset Management and Dow Jones Indexes created a brochure looking back on their first 10 years of existence. This summaries the first decade of the companies success and is a great resources for understand the past and continued evolution of the DJSI and its conglomerates.
Dow Jones Indexes
Dow Jones Indexes was formed in 1997 as an entity within Dow Jones & Co. It is now owned by the CME Group. It serves as the marketing name of CME Group Indexes, LLC. It produces, maintains, licenses and markets indexes as benchmarks and as the basis of investible products such as exchange traded...
and Sustainable Asset Management.
The DJSI is based on an analysis of corporate economic, environmental and social performance, assessing issues such as corporate governance, risk management, branding, climate change mitigation, supply chain standards and labor practices. The trend is to reject companies that do not operate in a sustainable and ethical manner. It includes general as well as industry specific sustainability criteria for each of the 57 sectors defined according to the Industry Classification Benchmark (ICB).
The DJSI family contains one main global index, the DJSI World, and various indexes based on geographic regions such as: Europe, Nordic, North America and Asia Pacific. The DJSI also contains industry specific indexes called “blue chip indexes.” In addition, the DJSI methodology facilitates the design, development and delivery of customized sustainability indexes; e.g. indexes covering different regions, indexes covering different segments of the leading sustainability companies, indexes covering additional exclusion criteria and indexes denominated in different currencies.
To be incorporated in the Dow Jones Sustainability Index, companies are assessed and selected based on their long term economic, social and environmental asset management plans. Selection criteria evolve each year and companies must continue to make improvements to their long term sustainability plans in order to remain on the Index. Indexes are updated yearly and companies are monitored throughout the year.
History and News
- 1999: The Dow Jones Sustainability Indexes are launched in September. It is collaboration with SAMSustainable Asset Management (SAM)Sustainable Asset Management is an international investment company with a specific focus on sustainability investments . The company is based in Zurich, Switzerland and considers economic, environmental and social criteria in its investment strategies. In addition to asset management, the company...
and the Dow Jones IndexesDow Jones IndexesDow Jones Indexes was formed in 1997 as an entity within Dow Jones & Co. It is now owned by the CME Group. It serves as the marketing name of CME Group Indexes, LLC. It produces, maintains, licenses and markets indexes as benchmarks and as the basis of investible products such as exchange traded...
. SAM is a global investment company focused exclusively on Sustainability Investing. The Indexes are created to track financial success of leading sustainability companies. The top 10 percent of the largest 2500 companies listed on Dow Jones are included.
- 2001: The DJSI is expanded to include STOXX Ltd., another indexing company. The Dow Jones STOXX Sustainability Index is introduced and marketed towards Europe’s sustainability leaders.
- 2005: Dow Jones Sustainability North America Index is created.
- 2006: Dow Jones Indexes and SAMSustainable Asset Management (SAM)Sustainable Asset Management is an international investment company with a specific focus on sustainability investments . The company is based in Zurich, Switzerland and considers economic, environmental and social criteria in its investment strategies. In addition to asset management, the company...
Launch Dow Jones Islamic Market Sustainability Index that combines Islamic investing principles and sustainability criteria from the DJSI.
- 2009: Dow Jones Sustainability Asia Pacific Index and Korea Index are launched.
- 2010: SAM and Dow Jones Indexes terminate collaboration with STOXX. “Dow Jones Indexes will be responsible for calculation, marketing and distribution of the indexes including the European Indexes, while SAM [will] remain responsible for the component selections. As a result, SAM’s collaboration with STOXX Ltd., which had previously calculated the European STOXX Sustainability Indexes, has been terminated.”
- 2010: SAM and Dow Jones Indexes Launch DJSI Nordic Index
Indexes
Indexes are denominated in both US dollars and Euros and are calculated using the Laspeyres formula. All Indexes that are not subsets exclude companies that generate revenue from alcohol, tobacco, gambling, armaments and firearms, and adult entertainment. Index components are based on free float market capitalization and most main indexes are reviewed quarterly, excluding the world index. Customized indexes are continuously being developed and delivered to encompass different regions or individualized sections of companies to add additional exclusions when needed and to change the currencies they are denoted in.The Dow Jones Sustainability Indexes have been divided into various benchmarks including the World, Europe, North America, Asia Pacific, Nordic, and Korean indexes.
DJSI World Index
The World Index, or DJSI World, was first published on September 1999, making it the first index. It is based on the largest 2500 companies in the [Dow Jones Global Total Stock Market Index Dow Jones Global Total Stock Market Index] (DJGTSMI). It covers the top 10% of these companies in terms of economic, environmental, and social criteria which equals about 300 companies. The DJSI World has two subset indexes, which are the Dow Jones Sustainability Index World 80 (DJSI World 80) and the Dow Jones Sustainability Index World ex US 80 (DJSI World ex US 80). Both subsets were initially published in August 2008 and track the performance of the largest 80 companies globally in terms of sustainability, with the DJSI World ex US 80 excluding the US from the top 80. The DJSI World and its subset are all reviewed on an annual basis.DJSI Europe and Eurozone Index
The Dow Jones Sustainability Europe Index covers the leading 20% of the largest 600 European companies in terms of sustainability from the DJGTSMI. It is subset by three different more specific indexes for the region, the main subset being the Dow Jones Sustainability Eurozone Index (DJSI Eurozone). This index tracks the financial performance of sustainability leaders in the smaller eurozone region. Both indexes were launched in August 2010 and have their own further subset. The two subsets are the Dow Jones Sustainability Europe 40 Index (DJSI Europe 40) and the Dow Jones Sustainability Eurozone 40 Index (DJSI Eurozone 40), both of which were also launched in August 2010. These track the top 40 sustainability leaders in Europe and the smaller Eurozone region. DJSI Europe and Eurozone are reviewed annually as well as quarterly to maintain accuracy of the index composition while the DJSI Europe 40 and DJSI Eurozone 40 are reviewed only annually.DJSI North America and United States Index
The Dow Jones Sustainability North American Index has a similar design as the DJSI Europe and also reviews the top 20% of the 600 largest companies, but in this case in North America. It was originally launched, along with its subset Dow Jones Sustainability United States Index (DJSI United States), in September 2005. Both Indexes are further broken down by the Dow Jones Sustainability North America 40 Index (DJSI North America 40) and the Dow Jones Sustainability United States 40 Index (DJSI United States 40), which cover the leading 40 sustainability driven companies in North America and The United States, respectively. Both subsets, however, were not launched until August 2008, three years after the DJSI North America.DJSI Asia Pacific Index
The Dow Jones Sustainability Asian Pacific Index (DJSI Asia Pacific) was launched at the same time as its single subset, the Dow Jones Sustainability Asia Pacific 40 Index (DJSI Asia Pacific 40), in January 2009. As of 2009, the DJSI Asia Pacific included 122 companies and captures the leading 20% of the top 600 companies in developed Asia Pacific Markets in terms of sustainability as derived from the DJGTSMI. DJSI Asia Pacific 40, the subset, tracks the largest 40 companies who are sustainability leaders in the Asia Pacific region.DJSI Korea Index
The Dow Jones Sustainability Korea Index is derived from the smallest pool of companies, tracking the most sustainable 30% of the largest 200 Korean companies. The Dow Jones Sustainability Korea Index (DJSI Korea) was launched in October 2009, along with its subset the Dow Jones Sustainability Korea 20 Index (DJSI Korea 20). As of this date, 41 companies were included in the DJSI Korea. DJSI Korea 20 encompasses the largest 20 sustainable leading companies in the region. The index encompasses a smaller region than the other indexes resulting in a higher percentage of companies analyzed and a lower number of companies that are reviewed in the subset. The DJSI Korea is also reviewed on an annual and quarterly basis whereas the DJSI Korea 20 is reviewed annually.Assessment
A defined set of criteria is used to assess the economic, social, and environmental opportunities of the companies that the DJSI has listed, which are chosen based on the Corporate Sustainability Assessment by SAM Research. Information comes from the annual SAM questionnaire, company transparency documentation, Media and Stakeholder Reports, and personal contact with the companies. Industry leaders from SAM Research’s Corporate Sustainability Assessment are chosen to be listed on the DJSI.Once a company is listed on the DJSI, it is monitored daily for any critical arising issues, which can lead to the exclusion of the company if deemed critical enough. Examples of events that would lead to exclusion include: commercial practices, human rights abuses, layoffs or worker disputes, or catastrophic disasters. These companies are monitored through publicly accessible information including media and company contact. If one of these critical events happens, the situation is analyzed for the scope in which it reaches. If large enough, the event will be analyzed further based on severity, media coverage, and crisis management. SAM analysts decide from here whether the company will be excluded from the DJSI. An assurance report is completed by Deloitte to ensure the validity of the company’s information.
In early 2009, an independent expert study commissioned by UNEP FI and presented at the World Economic Forum in Davos, highlighted the SAM assessment as “the most rigorous in terms of the number of questions and depth of information requested".
In 2009, SAM carried out its 11th consecutive [Corporate Sustainability Assessment], assessing more than 1,200 companies, an increase of 8% from 2008. At the onset of DJSI’s assessment criteria, SAM mainly focused on government compliance and regulations. It has evolved to embrace Corporate Sustainability as a key competitive advantage, taking into account nine specific criteria in addition to industry specific criteria. Below are the criteria and weightings SAM uses to assess a company’s overall score.
| Criteria | Weightings |
|---|---|
|
|
Note that these weightings are approximations, and actual weightings may differ between industries. A Breakdown of these Dimensions is seen below
| Economic Sector | Weightings in percentage |
|---|---|
| Corporate Governance | 6.0 |
| Risk and Crisis Management | 6.0 |
| Codes of Conduct/Compliance/Anti-Corruption & Bribery | 6.0 |
| Industry Specific Criteria | Depends on Industry |
| Environmental Sector | Weightings in Percentages |
|---|---|
| Environmental Reporting | 3.0 |
| Industry Specific Criteria | Depends on Industry |
| Social Sector | Weightings in Percentages |
|---|---|
| Human Capital Development | 5.5 |
| Talent Attraction & Retention | 5.5 |
| Labor Practice Indicators | 5.0 |
| Corporate Citizenship / Philanthropy | 3.0 |
| Social Reporting | 3.0 |
| Industry Specific Criteria | Depends on Industry |
Number of invited companies in 2010:
- Total Number Invited Companies = 2,617
- DJSI World Universe = 2,500
- DJSI Europe Universe = 600
- DJSI North America Universe = 600
- DJSI Asia Pacific = 600
- DJSI Korea = 200
- Companies analyzed globally = 1,393
- Companies completing questionnaire = 698
- Companies analyzed based exclusively on public information = 695
Some of the assessment criteria have varied slightly from year to year to reflect growing information about particular issues such as water related risks, brand management, corporate citizenship, risk and crisis management. Continuous improvement allows for SAM to provide both relevant and current information.
Since 1999, SAM’s Corporate Sustainability Assessment has increased in number of assessed companies, number of sectors, number of questions to companies, average totally sustainability score, and weight of sector-specific criteria in percentage total weight.
| 1999 | 2009 | |
|---|---|---|
| Number of assessed Companies | 468 | 1,237 |
| Number of Sectors | 68 | 58 |
| Number of questions to companies | 50 | 100 |
| Average Total sustainability score (out of 100) | 27 | 48 |
| Weight of sector-specific criteria (in % of total weight) | 30 | 57 |
Included in the most recent SAM questionnaire are more difficult to measure intangible business attributes such as innovation and customer relationship management. Questions are both directed at short-term risks and opportunities and sustainable long-term value creation. The intensity of the industry-specific criteria has continuously increased. In 1999, industry-specific information accounted for only 30% of the overall score, while now it accounts for nearly 60%.
From these questionnaires, each company can be awarded one or a combination of the following status:.
- Sector Leader: In each sector, the SAM Sector Leader is identified as the company best prepared to seize the opportunities and manage the risks deriving from economic, environmental and social developments. The SAM Sector Leader is the company with the best score of all companies assessed in this sector.
- Sector Mover: Sector Mover is awarded to the company that achieved the biggest proportional improvement in its Sustainability performance compared with last year.
- SAM Gold Class: To qualify for the SAM Gold Class, the SAM Sector Leader must achieve a minimum total score of 75%. Peer group companies whose total score is within 5% of the SAM Sector Leader are also awarded. SAM Gold Class. A score up to 10% lower than the leader results in SAM Silver Class, a score up to 15% lower than the leader results in SAM Bronze Class.
- SAM Silver Class: To qualify for the SAM Silver Class, the SAM Sector Leader must achieve a total score in the range of 70-75%. Peer group companies whose total score is within 5% of the SAM Sector Leader are also awarded SAM Silver Class, while a score of 10% lower than the leader results in SAM Bronze Class.
- Sam Bronze Class: To qualify for the SAM Bronze Class, the SAM Sector Leader must achieve a total score in the range of 65-70%. Peer group companies whose total score is within 5% of the SAM Sector Leader are also awarded SAM Bronze Class.
Companies Listed
The following lists are just a few of the more recognizable companies listed on the Dow Jones Sustainability Indexes. It is not a complete list, however, this list is for the 2010-2011 year and updated .| DJSI World Index | DJSI Europe Index | DJSI Eurozone Index |
|---|---|---|
|
Adidas Adidas AG is a German sports apparel manufacturer and parent company of the Adidas Group, which consists of the Reebok sportswear company, TaylorMade-Adidas golf company , and Rockport... AG - Germany Air France Air France , stylised as AIRFRANCE, is the French flag carrier headquartered in Tremblay-en-France, , and is one of the world's largest airlines. It is a subsidiary of the Air France-KLM Group and a founding member of the SkyTeam global airline alliance... - KLM - France AstraZeneca AstraZeneca plc is a global pharmaceutical and biologics company headquartered in London, United Kingdom. It is the world's seventh-largest pharmaceutical company measured by revenues and has operations in over 100 countries... PLC – United Kingdom BMW Bayerische Motoren Werke AG is a German automobile, motorcycle and engine manufacturing company founded in 1916. It also owns and produces the Mini marque, and is the parent company of Rolls-Royce Motor Cars. BMW produces motorcycles under BMW Motorrad and Husqvarna brands... AG- Germany Coca-Cola Coca-Cola is a carbonated soft drink sold in stores, restaurants, and vending machines in more than 200 countries. It is produced by The Coca-Cola Company of Atlanta, Georgia, and is often referred to simply as Coke... Hellenic Bottling Co. S.A. – Greece Deutsche Bank Deutsche Bank AG is a global financial service company with its headquarters in Frankfurt, Germany. It employs more than 100,000 people in over 70 countries, and has a large presence in Europe, the Americas, Asia Pacific and the emerging markets... AG - Germany Louis Vuitton Louis Vuitton Malletier – commonly referred to as Louis Vuitton , or shortened to LV – is a French fashion house founded in 1854 by Louis Vuitton. The label is well known for its LV monogram, which is featured on most products, ranging from luxury trunks and leather goods to ready-to-wear, shoes,... – France Nestlé Nestlé S.A. is the world's largest food and nutrition company. Founded and headquartered in Vevey, Switzerland, Nestlé originated in a 1905 merger of the Anglo-Swiss Milk Company, established in 1867 by brothers George Page and Charles Page, and Farine Lactée Henri Nestlé, founded in 1866 by Henri... S.A. – Switzerland Siemens Siemens may refer toSiemens, a German family name carried by generations of telecommunications industrialists, including:* Werner von Siemens , inventor, founder of Siemens AG... - Germany ThyssenKrupp ThyssenKrupp AG is a German multinational conglomerate corporation headquartered in Duisburg Essen, Germany. The corporation consists of 670 companies worldwide. While ThyssenKrupp is one of the world's largest steel producers, the company also provides components and systems for the automotive... AG - Germany Volkswagen Volkswagen is a German automobile manufacturer and is the original and biggest-selling marque of the Volkswagen Group, which now also owns the Audi, Bentley, Bugatti, Lamborghini, SEAT, and Škoda marques and the truck manufacturer Scania.Volkswagen means "people's car" in German, where it is... AG Non-Vtg Pfd. – Germany Volvo AB Volvo is a Swedish builder of commercial vehicles, including trucks, buses and construction equipment. Volvo also supplies marine and industrial drive systems, aerospace components and financial services... – Sweden Wolters Kluwer Wolters Kluwer N.V. is a global information services and publishing company. The company provides products and services for professionals in the health, tax, accounting, corporate, financial services, legal and regulatory sectors... N.V. – Netherlands Xstrata Xstrata plc is a global mining company headquartered in Zug, Switzerland and with its registered office in London, United Kingdom. It is a major producer of coal , copper, nickel, primary vanadium and zinc and the world's largest producer of ferrochrome... PLC – United Kingdom |
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| DJSI North American Index | DJSI Asia Pacific Index | DJSI Korean Index |
|---|---|---|
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Reviews
The November 2010 DJSI Review includes a review of: key facts (showcasing recent news and growth in asset management), 2010 assessment, Dow Jones Sustainability World Index, Dow Jones Sustainability Europe Index, Dow Jones Sustainability Asia Pacific Index, Dow Jones Sustainability North America Index, Dow Jones Sustainability Korea Index, and Adjustments to Sustainability Index 2010. Each index on the review includes an Index Range, Dow Jones Global Stock Market Index, Selection of companies (percent of companies per sector, percent of market cap coverage), the number of companies added and deleted from the DJSI, and component selection (based on industry). All changes will take effect at the close of trading on December 17, 2010.Publications
There are four different types of publications that the DJSI publishes and regularly updates. These include a yearly guidebook, fact sheets, presentations, and an all-encompassing brochure. These publications allow the information and indexes created each year to be accessible to the public and provide the facts about how the indexes are created, implemented, and changed.Guidebook
Each year a new guidebook is published that covers all pertinent information from the preceding year. The format of each guidebook remains the same from year to year keeping changes and referencing consistent. The guidebook is the main source of information concerning everything about the indexes and about the companies who are being evaluated with these indexes. The subjects covered in each region's guidebook are as follows:
- Dow Jones Sustainability Index Family
- Dow Jones Sustainability World Indexes
- Corporate Sustainability Assessment
- Corporate Sustainability Monitoring
- Index Features and Data Dissemination
- Annual and Quarterly Reviews
- Ongoing Maintenance
- Calculation Model
- Index Management and Responsibilities
These sections allow for a full understanding of the basic principles of the Dow Jones Sustainability Index while also keeping an updated account of the changes that have occurred within the preceding year and the new indexes that have been published for each region.
Factsheets
Factsheets have each region of the Indexes broken down into their corresponding subsets rather than their overall area. This allows for more ease of referencing and provides specific detailed facts about the data found in each sub region. The fact sheets serve as a more condensed form the guidebook in that the fact sheets lack the background information and the reasoning and descriptions behind the changes that occur each year.
Presentations
Each year, the DJSI creates a more user-friendly version of the guidebook by creating a presentation of each years indexes. Also included is the background information for each region and the selection process and reasoning involving in evaluating and choosing the sustainable corporations included in the index.
Brochure
On the 10-year anniversary of the founding of DJSI, the DJSI along with their collaborator in Sustainable Asset Management and Dow Jones Indexes created a brochure looking back on their first 10 years of existence. This summaries the first decade of the companies success and is a great resources for understand the past and continued evolution of the DJSI and its conglomerates.