DEFINITION of 'Dow Jones STOXX Sustainability Index'
A stock index that measures the financial performance of leading European companies as measured by their sustainability practices. The stock universe is the Dow Jones STOXX 600 Index, which captures more than 90% of the aggregate market cap of European-based companies.
The STOXX Sustainability Index contains the top 20% of these companies in terms of their aggregate sustainability score as obtained by SAM Group, a Zurich-based research firm.
The free float market capitalization-weighted index is reviewed both annually and quarterly; the quarterly reviews focus on share counts and weightings while the annual review incorporates the most recent sustainability scores and industry evaluations.
BREAKING DOWN 'Dow Jones STOXX Sustainability Index'
The sustainability indexes aim to capture companies on the leading edge of sustainability practice/reform; the sustainability score that each company receives is based on an intricate weighting system that examines company actions regarding things such as corporate governance, environmental performance, energy efficiency and climate change strategies.
The focus of the research (and related company score) is more on long-term sustainability than on short-term company benefits, so the financial performance of the index may underperform other benchmarks such as the Dow Jones STOXX 600 and MSCI Europe Indexes.
The index was first published in 2001, and in addition to the base index there are specialized sub-indexes that exclude industries such as alcohol, tobacco, firearms and gambling.