What is the EURO STOXX Sustainability Index
The EURO STOXX Sustainability Index measures the financial performance of leading Eurozone companies as measured by their sustainability and environmental practices. The stock universe is the Dow Jones STOXX Sustainability Index, from which only companies operating in 11 Eurozone nations (countries that have transitioned to the Euro) are chosen. The countries are: Austria, Belgium, Finland, France, Germany, Ireland, Italy, Luxembourg, the Netherlands, Portugal and Spain.
Companies are given a sustainability score based on a comprehensive review by research firm SAM Group; annual surveys are conducted on all potential companies so that company progress and new initiatives can be constantly measured and compared against industry peers.
The index is weighted based on free-float market capitalization and changes to the index are made annually after updated company sustainability scores have been obtained.
Quarterly weighting adjustments are also made as the market caps of member companies fluctuate.
BREAKING DOWN EURO STOXX Sustainability Index
The EURO STOXX Sustainability Index components must pass a bevy of tests and measures in order to be considered for the index. The score for each company is calculated using a comprehensive weighting system that looks at company efforts in areas such as climate change, energy efficiency, knowledge management, shareholder relations and corporate governance. In addition, companies are evaluated by how sustainable their practices are compared to their own industry, reflecting the fact that each industry has its own parameters and inherent environmental issues.
Sustainability is a long-term company strategy, and is seen as including both economic and social costs that typically cannot be measured within a quarterly or annual time frame.
Which components and sectors are included in the index?
As of May 2018, the 10 biggest sector weightings in the index are as follows: 12.5% industrial goods and services, 10.1% health care, 10.1% personal and household goods, 9.6% technology, 8.2% insurance, 6.0% food and beverage, 5.9% utilities, 5.1% chemicals, 4.8% construction and materials and 4.8% banks.
The top 10 components in the index are: technology company SAP, with a 3.11% weighting; industrial company Siemens, with a 2.97% weighting; insurance giant Allianz, with a 2.73% weighting; health care companies Bayer and Sanofi, with weightings of 3.56% and 2.53%, respectively; personal and household goods provider Unilever, with a 2.42% weighting; technology firm ASM Holding, with a 2.33% weighting; personal and household goods maker LVMH Moet Hennessey, with a 2.28% weighting; food and beverage behemoth Anheuser-Busch InBev, with a 2.24% weighting; and insurance company AXA, with a 1.52% weighting.