Investor demand has led to a growing number of sustainable equity indexes to be launched in the marketplace. These deploy various selection techniques from exclusionary to best-in-class to thematic approaches. The major providers across the ESG index marketplace are MSCI, FTSE and S&P Dow Jones.
In September 2010, the FTSE KLD Indexes transitioned into the MSCI ESG Indexes. The MSCI KLD Indexes, such as the FTSE KLD 400 Social Index, were originally launched in May 1990 and so MSCI can claim to provide the longest track record of sustainable indexes in the marketplace. Among their various indexes, the MSCI World SRI is the benchmark index.
In 2001, the FTSE created the family of FTSE4Good Indexes. These not only pursue similar investment styles as the DJSI family, but also included indexes with specific theme or impact investment solutions. Within the FTSE family, the FTSE4Good Global Index is the benchmark index.
S&P Dow Jones launched a suite of sustainable equity index products in 1999. Among the DJSI family, the Dow Jones Sustainability World Index is the benchmark. This has been complemented by a range of positive exclusion and best-inclass index strategies.
Within the Deutsche Asset Management ESG family, the CROCI World ESG strategy was one of the first to be launched. This is a 75-stock, region-neutral, globally developed market equity strategy and has been run on a live basis since July
2014. Many of Deutsche Asset Management’s ESG strategies deploy the ESG Engine filter to ensure compliance with leading standards for environmental, social and governance criteria.
In this article, we examine the sustainable index providers of MSCI, FTSE and S&P Dow Jones. In future reports we will expand our coverage to include other providers such as Stoxx/Deutsche Börse. For the indexes under investigation, these can be classified according to three investment styles, which are outlined on the next page and in Figure 1.