In This List

FA Talks: Managing Retirement Hazards with Managed Indexing

Integrating ESG Values into Core around the World: The S&P 500® ESG Index and Beyond

Discover Material Insights with S&P DJI ESG Data

The S&P 500® ESG Index: Integrating Environmental, Social, and Governance Values into the Core

Understanding REIT Sectors

FA Talks: Managing Retirement Hazards with Managed Indexing

FA Talks is an interview series where industry thinkers share their thoughts and perspectives on a variety of market trends and themes impacting indexing

Accelerated Wealth (AW) is one of the fastest-growing wealth management firms in Colorado, with 9 offices around the U.S. AW, a hybrid planning firm specializing in both insurance and investment-based planning, just celebrated its first decade in business, and has won The Colorado Springs Gazette’s “Best of Colorado Springs” for financial planner 5 years in a row. As it is one of the few advisory firms we are seeing that are combining fixed indexed annuities and index-based investment management, S&P Dow Jones Indices (S&P DJI) recently interviewed senior leadership at AW to learn more about how indexing plays a role in how they plan and manage retirement risk.

S&P DJI: Tell us what holistic wealth management means for Accelerated Wealth?

AW: We created a process meant to bring as much peace to our clients’ lives as possible. Through our Keys to the City client service model, our process begins with holistic financial planning. This process includes a full evaluation across various financial strategies such as social security, income planning, required minimum distributions, investment portfolio analysis, life insurance and annuity inventory, health insurance, property and casualty insurance, identity and cyber security protection, estate planning, wealth transfer, and asset protection. We take great pride in our focus on building financial plans as opposed to running a business that is financial product centric.

The second step of the Keys to the City process is referred to as family legacy. In this process, we focus in on the family unit of our client. We want to do everything we can to ensure that the legacy that our clients are leaving are a blessing, and do not turn into a curse. We offer training on personality preference and emotional intelligence, and we help create an understanding for our clients as it relates to who they are as investors. We find that by providing this type of training, the family unit naturally begins to improve in their communication, conflict management, and decision-making.

If a wealth management firm is going to speak to holistic planning, we believe there is a mandate to provide offerings that do not just focus on the mechanics of the financial plan itself, but must also provide offerings that equip the client to execute the plan behaviorally.

As it relates to the financial plan itself, we want to ensure that we are not biased in the financial instruments we utilize by our licensing or past experiences. We want to know that our advisors have the ability to choose from the entire universe of asset classes when building their clients’ plans.

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Integrating ESG Values into Core around the World: The S&P 500® ESG Index and Beyond

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Daniel Perrone

Director and Head of Operations, ESG Indices

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Reid Steadman

Managing Director, Global Head of ESG

EXECUTIVE SUMMARY

  • The S&P ESG Indices align investment objectives with environmental, social, and governance (ESG) values.
  • The indices, which include the S&P 500 ESG Index can serve as benchmarks as well as the basis for index-linked investment products. The S&P ESG Indices’ broad market exposure and industry diversification result in return profiles similar to those of their benchmarks (see Appendix 1).
  • The indices use the new S&P DJI ESG Scores (see page 4) and other ESG data to select companies, targeting 75% of the market capitalization of each GICS® industry group within each index.
  • The S&P ESG Index Series excludes tobacco, controversial weapons, and companies not in compliance with the UN Global Compact (UNGC). In addition, those with S&P DJI ESG Scores in the bottom 25% of companies globally within their GICS industry groups are excluded.
  • Our methodology results in improved composite ESG scores for all the indices in the series (see Exhibit 4).

INTRODUCTION

An increasing number of investors require indices that are aligned with their investment objectives and their personal or institutional values.  The S&P ESG Indices were designed with both of these needs in mind.

The S&P ESG Indices are broad and constructed to be part of the core of an investor’s portfolio, unlike many ESG indices that have preceded them, which were thematic or narrow in their focus.  By targeting 75% of the benchmark index’s market capitalization, industry by industry, the S&P ESG Indices offer industry diversification and return profiles in line with their underlying markets (for a full list of indices in the series and their return profiles, see Appendix 1).

Yet, the composition of these new indices are meaningfully different from that of their benchmark indices and more compatible with the values of ESG investors.  Exclusions are made related to tobacco, controversial weapons, and compliance with the UNGC.  Furthermore, companies with low ESG scores relative to their industry peers around the world are also excluded. The result is an index series suitable for investors moving ESG from the fringe of their portfolio to the core.

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Discover Material Insights with S&P DJI ESG Data

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Mona Naqvi

Senior Director, Head of ESG Product Strategy, North America

  1. INTRODUCTION

A quarter of all professionally managed assets now incorporate environmental, social, and governance (ESG) considerations,[1] from the impact of climate change to equality and human rights.  The rich history of S&P Dow Jones Indices (S&P DJI) in this area began in 1999 by pioneering ESG indexing with the launch of the Dow Jones Sustainability Index (DJSI), which marks its 20th anniversary in 2019.

S&P DJI continues to lead sustainable indexing solutions with a suite of more than 150 headline ESG benchmarks, shaping the sustainable investing landscape.  The industry has changed considerably over the past 20 years, from a focus on sector exclusions borne out of the socially responsible investment (SRI) movement, to more nuanced approaches to broad market ownership that reweight based on company performance on ESG.  These are largely driven by the improved availability and quality of ESG data, amplified by the launch of S&P DJI ESG Scoresa rigorous new ESG dataset cultivated over 20 years of sustainable investment experience by our partner, RobecoSAM (through its SAM[1] brand), that are now available to the market for the first time. 

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The S&P 500® ESG Index: Integrating Environmental, Social, and Governance Values into the Core

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Daniel Perrone

Director and Head of Operations, ESG Indices

Contributor Image
Reid Steadman

Managing Director, Global Head of ESG

EXECUTIVE SUMMARY

  • The S&P 500 ESG Index aligns investment objectives with environmental, social, and governance (ESG) values.
  • It can serve as a benchmark as well as the basis for index-linked investment products. The index’s broad market exposure and industry diversification result in a return profile similar to that of the S&P 500.
  • The index uses the new S&P DJI ESG Scores (see page 4) and other ESG data to select companies, targeting 75% of the market capitalization of each GICS® industry group within the S&P 500.
  • The S&P 500 ESG Index excludes tobacco, controversial weapons, and companies not in compliance with the UN Global Compact (UNGC). In addition, those with S&P DJI ESG Scores in the bottom 25% of companies globally within their GICS industry groups are excluded.
  • Our methodology results in an improved composite ESG score compared with the S&P 500. This holds true in all industries.

INTRODUCTION

An increasing number of investors require indices that are aligned with their investment objectives and their personal or institutional values.  The S&P 500 ESG Index was designed with both of these needs in mind.

The S&P 500 ESG Index is broad and constructed to be part of the core of an investor’s portfolio, unlike many ESG indices that have preceded it, which were thematic or narrow in their focus.  By targeting 75% of the S&P 500’s market capitalization, industry by industry, the S&P 500 ESG Index offers industry diversification and a return profile in line with the U.S. largecap market.

Yet the composition of this new index is meaningfully different from that of the S&P 500 and more compatible with the values of ESG investors.  Exclusions are made related to tobacco, controversial weapons, and compliance with the UNGC.  Furthermore, companies with low ESG scores relative to their industry peers around the world are also excluded.  The result is an index suitable for investors moving ESG from the fringe of their portfolio to the core.

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Understanding REIT Sectors

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Qing Li

Director, Global Research & Design

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Michael Orzano

Senior Director, Global Equity Indices

INTRODUCTION

In recent years, the U.S. real estate sector expanded to include a wide range of companies that own and operate a diverse set of assets.  As recently as 2010, the sector was dominated by companies that owned traditional commercial properties such as office buildings, apartment complexes, warehouses, and shopping centers.  However, the recent growth of specialized REITs—like those that own cell towers, data centers, and timberland, among other non-traditional real estate assets—has transformed the sector into a complex array of companies that derive income from highly distinct assets.  While all REITs share certain characteristics such as offering relatively high dividend yields, the fundamental differences in the underlying assets owned by REITs across sectors have led to different investment characteristics and patterns of returns and volatility.

REIT SECTOR OVERVIEW

There are two main types of REITs: equity REITs and mortgage REITs.  Equity REITs own and operate income-producing real estate and typically earn income through rents.  Mortgage REITs lend money directly to real estate owners and operators, or indirectly through the purchase of mortgages or mortgage-backed securities, and they earn income from the interest on these investments.  Based on the property type each equity REIT owns, we can further categorize it by its sector.  Most REITs specialize in a single property type, while some manage portfolios that include multiple types of properties.  Exhibit 1 provides an overview of the main equity REIT sectors.  

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