What is the Dow Jones Sustainability World Index
The Dow Jones Sustainability World Index, or DJSI World, is a global index consisting of the top 10% of the largest 2,500 stocks in the S&P Global Broad Market Index based on their sustainability and environmental practices. The index was started in 1999, and is maintained by S&P Dow Jones Indices in conjunction with RobecoSAM, a Zurich-based investment specialist that conducts detailed sustainability research on thousands of global market-cap leaders each year.
BREAKING DOWN Dow Jones Sustainability World Index
The Dow Jones Sustainability World Index (W1SGI) is part of a larger family of Dow Jones Sustainability Indices (DJSI) that launched in 1999 as the first global sustainability benchmark. The family of indices includes DJSI World counterparts specific to North America, Europe, Asia Pacific, Korea, Australia, Chile and emerging markets.
DJSI World covers dozens of industry groups and has members in more than 20 nations. Because of increased investor appetite for socially conscious investments and corporate environmental responsibility, the index has been licensed by many private wealth managers to use as a benchmark and has billions of assets under management pegged to it.
As of February 2018, some of the index's top 10 constituents by weight included Microsoft, Nestle, Bank of America, Citigroup and Samsung Electronics, the latter being an addition to the list in September 2017. Many companies that become members of the index see it as an opportunity to enhance shareholder awareness of environmental efforts and will issue press releases to announce their index membership and tout their environmental sustainability leadership.
DJSI World Characteristics and Methodology
DJSI World, in March 2018, reported 318 constituents and five-year annualized net total returns of 9.5%. About a third of the benchmark's weight by market capitalization was concentrated in companies based in the United States, of which there were nearly 50. In terms of environment, social and governance disclosures, the index reported a carbon footprint (measured in metric tons of CO2 emissions per $1 million invested) about 25% better than the broader S&P Global BMI, the index from which DJSI World draws its constituents. Fossil fuel reserve emissions averaged nearly half of those reported for the S&P Global BMI, and DJSI World also fared better in terms of carbon efficiency.
The index is weighted based on free-float market capitalization, and changes are made once each year in September based on updated sustainability scores. Each company represented in the index has its corporate sustainability assessed through an intricate weighting system that looks at economic, environmental and social metrics. Candidate firms are further assessed based on media and stakeholder commentary and industry-specific criteria. Companies are reevaluated each year; those that fail to show consistent progress may be removed from the index.