What Is GICS® and Why Is It Important?
The Global Industry Classification Standard (GICS), created in 1999 by S&P Dow Jones Indices (S&P DJI) and MSCI, was developed to meet the financial community’s need for accurate, comprehensive and standardized industry definitions. The framework underpins sector-based benchmarks, including the S&P 500® Sector Indices and S&P Select Industry Indices, and facilitates comparable analysis and sector-based investing.
GICS key features:
- Universal: Applies to companies globally.
- Flexible: Offers multiple levels of analysis, ranging from the most general sectors to the most specialized sub-industries.
- Reliable: Accurate and complete industry framework for investment research, portfolio management and asset allocation.
- Evolving: Reviewed annually to ensure GICS remains fully representative of global markets.
Why Sector Classification Matters
Beyond providing a common language, GICS matters because classification directly affects how risk and performance are analyzed. Companies sharing similar business activities and revenue exposures are more likely to have similar sensitivity to drivers of market performance. By grouping these companies under the same framework, market participants can meaningfully compare performance and risk across market segments.
The hierarchical structure of GICS provides additional levels of detail and allows for varying degrees of granularity in analysis.
An evolving classification system is also paramount to ensure that company groupings reflect the most up-to-date company status and market segment conditions. The GICS structure addresses this challenge and seeks to enhance both transparency and efficiency in market analysis.
Who Are the Users of GICS? What Are Common Applications?
The GICS methodology has been widely accepted as an industry analysis framework for investment research, portfolio management and asset allocation. A broad range of market participants, including individual investors, asset owners, asset managers, index providers and research analysts, are all actively using the GICS framework to facilitate consistent communication and analysis.
Common applications of GICS include:
- Sector‑based performance and attribution analysis
- Portfolio exposure and diversification assessment
- Benchmark construction and comparison
- Asset allocation and risk management
The GICS Structure
GICS is a four-tiered, hierarchical industry classification system: sector, industry group, industry and sub-industry. Currently, GICS includes 11 sectors, providing the top-level view that is most commonly referenced in market commentary, portfolio analysis and sector-based investment.
