DEFINITION of MSCI KLD 400 Social Index
The MSCI KLD 400 Social Index, previously known as the Domini 400 Social Index, is a market cap weighted stock index of 400 publicly-traded companies that have met certain standards of social and environmental excellence. Potential candidates for this index will have positive records on issues such as employee and human relations, product safety, environmental safety, and corporate governance. Companies engaged in the business of alcohol, tobacco, firearms, gambling, nuclear power and military weapons are automatically excluded.
Founded in 1990 as the Domini 400 Social index, and renamed the MSCI KLD 400 Social Index in 2010, this index is one of the first Socially Responsible Investing (SRI) indexes, designed to help socially conscious investors weigh social and environmental factors in their investment choices.
BREAKING DOWN MSCI KLD 400 Social Index
Socially responsible investing is a growing trend across many demographic and geographic areas, and having a social conscience may become a competitive advantage for corporations through their relationships with shareholders.
The index is independently maintained by research firm KLD Research & Analytics, and aims to maintain similar sector weights as the MSCI USA index, targeting at least 200 large- and mid-cap stocks in the S&P 500; 100 companies not in the S&P 500, but providing sector diversification and exceeding pre-determined market cap limitations; and 50 companies that have shown excellence in their social and environmental dealings.
Companies can be eliminated from the index on a quarterly basis if their Environmental, Social and Governance (ESG) ratings decline below certain standards, if they are removed from the MSCI USA IMI index, or if they no longer pass exclusion screens. They are then replaced by those with higher ESG scores to maintain the count of 400 securities.
As of December 2017, the indexes' biggest holdings are Microsoft, Facebook, Google parent Alphabet, Procter & Gamble and Intel.
Since May 1994 through December 2017, the MSCI KLD 400 Social Index has returned 10.06% annualized, versus a 10% return in its benchmark MSCI USA IMI index.