WHAT IS THE Dow Jones STOXX Sustainability Index
Dow Jones STOXX Sustainability Index is a stock index that measures the financial performance of leading European companies by assessing their sustainability practices. The index captures more than 90 percent of the aggregate market cap of European-based companies. The STOXX Sustainability Index contains the top 20 percent of these companies in terms of their aggregate sustainability score as obtained by SAM Group, a Zurich-based research firm.
BREAKING DOWN Dow Jones STOXX Sustainability Index
Dow Jones STOXX Sustainability is weighted based on free float market capitalization, and 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.
Sustainability indexes, like the Dow Jones STOXX Sustainability Index, aim to capture companies on the leading edge of sustainability practice or reform. The sustainability score that each company receives is based on an intricate weighting system that examines company actions regarding corporate governance, environmental performance, energy efficiency and climate change strategies. The focus of the sustainability research and related company score is to identify more long-term sustainability practices than on short-term company benefits. Therefore the financial performance of the index may under-represent other benchmarks.
The Dow Jones STOXX Sustainability index was first published in 2001, and in addition to the base index includes specialized sub-indexes that exclude industries such as alcohol, tobacco, firearms and gambling.
Other Types of Indexes
The Dow Jones STOXX 50 is also a stock index, but differs from the Dow Jones STOXX Sustainability Index in that it represents 50 of the largest companies in Europe based only on market capitalization. The Dow Jones STOXX 50 index reconstitutes its holding annually, and adjusts its weightings quarterly to account for proportional changes in underlying company market caps. The Dow Jones STOXX 50 is part of an aggregate of the 18 Dow Jones STOXX 600 Supersector indices, which together capture about 95 percent of the capitalization of the major stock exchanges in 18 European countries.
By contrast, the MSCI Europe Index captures large and mid cap representation across 15 developed markets countries in Europe. The index covers approximately 85 percent of the free float-adjusted market capitalization across the European developed markets equity universe, and includes 447 constituents.
Market capitalization represents the total dollar market value of a company's outstanding shares, calculated by multiplying a company's shares outstanding by the current market price of one share. Because company size is a basic determinant of various characteristics, including risk, market capitalization is important for investors to determine.