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September 5, 2008
Top Ethical Investing
Indices: A Global Overview
by
Ron Robins*
The growth of ethical stock and
bond indices around the world has been exciting and
rapid in recent years. There is hardly a continent where
they are not represented. Investors everywhere want to
make good returns by doing good. Many mutual funds, unit
trusts, and exchange traded funds (ETFs), are now based
on these indices.
The performance of any particular
index generally depends on the popularity of the sectors
represented within it. The attention on climate change
benefits the green-sustainability sector which has a
narrow focus on green technology and alternative energy.
The socially responsible-ethical indices are more
diversified and often follow larger stock market trends.
They usually have little exposure to commodities and
extractive industries, and tend to be heavily weighted
in technology, health, finance and consumer goods. (A
review of the articles on our
Ethical Investing Studies/Research page might be
helpful in understanding the composition and performance
of these indices and associated funds.)
Here is a brief description, with
links, to what I believe are the most prominent of these
indices. Information and performance of funds associated
with an index can usually be found on its website.
Green-Sustainability Indices:
ACT Australian Cleantech Index
(Australia)
"The ACT Australian Cleantech Index provides a
measure of the performance of the Australian listed
stocks in the Cleantech sector."
FTSE Environmental Technology Index Series
(U.K.)
"FTSE Group has launched the FTSE Environmental
Technology Index Series in collaboration with the
environmental technology specialist, Impax Asset
Management, to provide two new environmental technology
index solutions: the FTSE ET50 Index and FTSE
Environmental Opportunities All-Share Index."
Impax ET50 (U.K.)
The Impax ET50 is a stock index of companies whose core
business involves environmental technologies.
NASDAQ® Clean Edge® U.S. Liquid Series Index (CELS)
(U.S.A.)
"The NASDAQ® Clean Edge® U.S. Liquid Series Index (CELS)
is a modified market capitalization-weighted index
designed to track the performance of companies that are
primarily manufacturers, developers, distributors, or
installers of clean-energy technologies."
The Renaissance Green IPO Index
(U.S.A.)
"The Renaissance Green IPO Index captures the
performance of newly public companies whose products and
services offer solutions to environmental problems."
WilderHill New Energy
Global Innovation Index
(U.K. & U.S.A.)
"The WilderHill New Energy Global Innovation Index is
comprised of companies worldwide whose innovative
technologies and services focus on generation and use of
cleaner energy, conservation and efficiency, and
advancing renewable energy generally."
WilderHill Clean Energy Index (U.S.A.)
WilderHill Clean Energy Index is an American Stock
Exchange based index, "... comprised of publicly
traded companies whose businesses stand to benefit
substantially from societal transition toward the use of
cleaner energy and conservation."
Socially Responsible-Ethically
Focused Indices:
Bovespa ISE
(Brazil)
"ISE is designed to measure the return on a portfolio
composed of shares of companies highly committed to
social responsibility... corporate sustainability...
good practices in the Brazilian corporate environment."
Calvert Social Index
(U.S.A.)
"... the Calvert Social IndexTM, as a broad-based,
rigorously constructed benchmark for measuring the
performance of US-based socially responsible companies."
Domini 400 Social Index
(U.S.A.)
"... KLD’s Domini 400 SocialSM Index (DS400) is a
float-adjusted market capitalization weighted common
stock index modeled on the S&P 500® Index."
Dow Jones Sustainability Indices (Global)
Dow Jones Sustainability Indices are North American and
global socially and environmentally screened stock
indices.
FTSE4Good Index Series
(Global)
Financial Times of London share indices of socially and
environmentally screened firms. Indices range from
individual countries to specific industrial sectors.
India Islamic Index
(India)
"The Eastwind Capital Advisors Pvt Ltd., the
Indo-Arab Economic Forum and Institute of Objective
Studies launched the EW India Islamic Index... comprises
only of Shariah compliant companies equity and excludes
companies engaged in alcohol products, pork-related
products, conventional financial services like banking
and insurance, gambling, hotels and all other business
which the Shariah supervisory board considers as
unethical."
Jantzi Social Index (JSI)
(Can.)
The Jantzi Social Index is a Canadian socially and
environmentally screened share index.
JSE SRI Index
(South Africa)
"The JSE’s Socially Responsible Investment (“SRI”)
Index was launched in May 2004 in response to the
burgeoning debate around sustainability globally and
particularly in the South African context."
KLD Broad Market Social Index
(U.S.A.)
"The KLD Broad Market SocialSM Index (BMS)...
capturing the best environmental, social and governance
(ESG) performers in each sector of the Russell 3000...
represents 98% of the capitalization of the US equity
market."
KLD U.S. Corporate Bond (USCB) Index
(U.S.A.)
"The [KLD U.S. Corporate Bond] investable indexes
are the first to apply environmental, social and
governance (ESG) performance factors to a U.S. fixed
income asset class." (I have included here a
separate KLD link as this class of index, an ESG
corporate bond index, is the first of its kind in the
US.)
LOHAS Index
(U.S.A.)
"LOHAS is an acronym for Lifestyles of Health and
Sustainability. [Companies in this index] practice
'responsible capitalism' by providing goods and services
using economic and environmentally sustainable business
practices." There are three indices: the LOHAS
Index, Healthy Living Index, and Sustainable Economy
Index.
S&P ESG India
(India)
"The S&P ESG India index provides investors with
exposure to a liquid and tradable index of 50 of the
best performing stocks in the Indian market as measured
by environmental, social, and governance parameters."
SRI Index Malaysia & Singapore SRI Index
(Malaysia)
"OWW Consulting launched the Responsibility™ SRI
Index Series which aims to identify companies in
Malaysia and Singapore with good CSR (or Economic,
Social and Governance, ESG) reporting... "
From the above it is clear that
ethical investors can now invest globally and be well
diversified. Many more ethically-based indices are
likely in the years ahead.
*
Ron Robins, MBA, is founder, Investing for the
Soul, (http://investingforthesoul.com/),
Huntsville, Canada. He advocates, writes and teaches on
the subject of ethical investing. To contact him, e-mail
to
Ron Robins or call 705-635-3034.
© Ron
Robins, 2008. |
