FAQ: The S&P Sustainability Screened Indices

COMPANY BACKGROUND

1. Who is S&P Dow Jones Indices?  S&P Dow Jones Indices (S&P DJI) is home to iconic financial market indicators, such as the S&P 500^® and the Dow Jones Industrial Average^®.  The largest global resource for essential index-based market concepts, data, and research, it is a major investor resource to measure and trade the markets.

   S&P Dow Jones Indices has been a pioneer in environmental, social, and governance (ESG) indexing for over 20 years, starting with the 1999 launch of the Dow Jones Sustainability World Index.  Today, we offer an extensive range of indices to fit varying risk/return and ESG expectations, from core ESG and low-carbon climate approaches to thematic and fixed income ESG strategies.

S&P SUSTAINABILITY SCREENED INDICES

1. What are the S&P Sustainability Screened Indices?  The S&P Sustainability Screened Indices seek to measure the performance of stocks in broad market indices, such as the S&P 500, S&P MidCap 400^®, and S&P SmallCap 600^®, while excluding companies involved in certain controversial business activities, companies not compliant with the United Nations Global Compact (UNGC), and companies involved in ESG controversies.
2. What exclusions affect the calculation of the S&P Sustainability Screened Indices? As of each rebalancing reference date, companies with the following specific business activities are excluded from the eligible universe.
   • Thermal Coal: Companies are excluded that:
     • Extract thermal coal accounting for greater than 5% of their revenue; or
     • Generate electricity from thermal coal accounting for greater than 5% of their revenue.
   • Oil Sands: Companies are excluded that:
     • Extract oil sands accounting for greater than 5% of their revenue.
   • Shale Energy: Companies are excluded that:
     • Are involved in shale energy exploration and/or production accounting for greater than 5% of their revenue.
   • Tobacco: Companies are excluded that:
     • Produce tobacco;
     • Have tobacco sales accounting for greater than 10% of their revenue;
     • Have tobacco-related products and services accounting for greater than 10% of their revenue; or
     • Have an ownership stake of 25% or more in a company that has tobacco-related products and services accounting for greater than 10% of their revenue.
   • Controversial Weapons: Companies are excluded that either directly or via an ownership stake of 25% or more of another company are involved in the core weapon system, or components/services of the core weapon system that are, and are not, considered tailor-made and essential for the lethal use of the following weapons:
     • Cluster weapons;
     • Landmines (anti-personnel mines);
     • Biological or chemical weapons;
     • Depleted uranium weapons;
     • White phosphorus weapons; or
     • Nuclear weapons.
   • Small Arms: Companies are excluded that, at a 0% threshold of their revenue:
     • Manufacture and sell assault weapons and/or small arms (non-assault weapons) to civilian customers;
     • Manufacture and sell small arms to military/law enforcement customers;
     • Manufacture and sell key components of small arms; or
     • Sell and/or distribute assault weapons and/or small arms (non-assault weapons).

   In addition, companies are evaluated according to Sustainalytics’ Global Standards Screening (GSS), which is an assessment of a company’s impact on stakeholders and the extent to which a company causes, contributes to, or is linked to violations of international norms and standards.  The UNGC principles are the basis for the GSS.

   All companies classified as Non-compliant (companies that do not act in accordance with UNGC principles and associated standards, conventions, and treaties) are ineligible for the index.

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