S&P Global ESG Data Primer

Physical versus Synthetic Gold: Know Your Gold Exposure

FAQ: The S&P Sustainability Screened Indices

TalkingPoints: Charting a Course for the Continued Rise of Passive in India

TalkingPoints: ESG Access Continues to Evolve in Mexico – Get to Know the S&P/BMV Total Mexico ESG Index

S&P Global ESG Data Primer

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Mona Naqvi

Global Head of ESG Capital Markets Strategy

S&P Global Sustainable1


S&P DJI ESG Scores robustly measure corporate sustainability performance with a focus on the most financially material issues within industries. Data is collected through the renowned SAM Corporate Sustainability Assessment (CSA) to engage companies directly for unparalleled access to private information. By going beyond simply collecting public disclosure, the CSA can bring to light emerging topics of growing interest to investors, often long before disclosure is widespread, for a cutting-edge view of corporate sustainability practices. Furthermore, this direct engagement allows us to assess how well companies actually perform on sustainability metrics, rather than simply rewarding corporate transparency and completeness, as is common with datasets that rely solely upon publicly reported information. All responses must be substantiated with internal documentation and real-life examples, audited by a third party where relevant in order to verify the accuracy of the information provided.

The CSA assesses 7,300 companies (representing approximately 95% of global market capitalization) through 61 industry assessments that cover the most relevant ESG issues.  Once a company’s assessment is complete, SAM calculates scores using a predefined scoring framework driven by the financial materiality of topics within specific industries.  The concept of materiality here is defined by both risk exposure and the relevance of financial outcomes—underpinned by more than two decades of investment performance data rather than an arbitrary or theoretical approach to identifying material issues.  Built upon a solid foundation of 600-1,000 data points per company, up to 120 question-level scores are then calculated for companies’ responses to each CSA question.  These scores are aggregated to as many as 27 industry-specific criteria, and the environmental (E score), social (S score), and governance (G score) dimensions before ultimately rolling up into the headline ESG score through a granular and bottom-up approach.

S&P Global ESG Data Primer: Exhibit 1

The CSA is an annual and resource-intensive endeavor that typically takes companies several hundred hours to complete. Once led by CSR professionals in a marketing function, today the CSA often pulls resources from across the organization for a firm-wide view of how sustainability topics influence the business operations and budgeting decisions from the c-suite. In addition to annual assessments, the methodology also incorporates the Media and Stakeholder Analysis (MSA), using daily reporting of real-time information to account for company controversies on an ongoing basis. By combining comprehensive data sources, sound methodology, and a sharp focus on material issues in this way, the CSA is recognized as the “highest quality” and most “useful” ESG assessment by global sustainability professionals and investors.

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Physical versus Synthetic Gold: Know Your Gold Exposure

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Fiona Boal

Managing Director, Global Head of Equities

The S&P GSCI Gold was up 22% over the first 10 months of 2020.  There are a number of drivers behind its upward performance.  The global pandemic has persuaded investors that gold is a valuable addition to their portfolios as a hedge against equity returns, near zero interest rates, a depreciating U.S. dollar, and lagging economic growth.  Many institutional investors are also using gold as protection against possible deflation or conversely, against an uptick in inflation, the effect of massive fiscal, and monetary stimulus.

Investors have available to them a myriad of vehicles to invest in the performance of gold—from gold bars and mining equities to derivatives and financial products based on derivatives.  Two of the more popular gold investment instruments professional investors use are gold futures, including financial instruments based on gold futures, and exchange-traded products (ETPs) based on physical gold.  In many cases, both derivatives and ETPs are appropriate choices, but there are noteworthy differences in terms of price discovery, liquidity, leverage, cost structure, counterparty risk, and customization that warrant investigation before any investment decision is made.

Gold bugs may tout holding physical gold as offering protection from a true black swan event, such as the complete collapse of a fiat currency, but there are legitimate questions regarding how practical a few gold bars would be in the aftermath of such an event.  Nevertheless, the focus of this paper is to compare the advantages and disadvantages of investment instruments backed by physical gold versus those based on gold derivatives, not on holding physical gold bars and coins (see Exhibit 1).

Physical versus Synthetic Gold: Know Your Gold Exposure: Exhibit 1

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FAQ: The S&P Sustainability Screened Indices


  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.


  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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TalkingPoints: Charting a Course for the Continued Rise of Passive in India

While India has taken to passive investing in a big way, there are still a few hurdles preventing serious growth. We sat down with Tyler Carter, Associate Director, Global ETF Strategy at S&P DJI, to explore how passive’s rise in other markets could help inform a path forward in India.

1. How large is the passive market in India today and what has its growth trajectory looked like in recent years?

Tyler: The passive exchange-traded fund (ETF) market in India reached USD 25 billion in 2020. While this is modest compared with more established markets, the growth trajectory has picked up significantly in recent years; the 10-year CAGR sits at 49%, which is over twice the annual growth rate of the global ETF market overall. As we have seen in more developed markets, the ETF sponsors that establish a footprint early on tend to remain at the forefront as the market grows.  

2. Some investors in India still prefer active management despite increased interest in and availability of passive strategies. What have been some of the influences of a shift to passive in other emerging markets?

Tyler: Passive is certainly making inroads. In just the past two years, passive ETFs have grown from 2% of the Indian mutual fund industry to over 9%. The driver of this appears to be the same driver that exists in other markets that have seen a similar shift: potential value. Passive investing has historically provided a cheaper alternative for gaining broad exposure to the markets than active management. Despite often lower costs, passive access to markets hasn’t necessarily come at the expense of returns. For example, our headline index in India, the S&P BSE 100, has outperformed over 82% of active funds over a five-year period. (Note, however, index performance is not the same as fund performance. Index performance does not account for management fees, transaction costs, or other expenses.) Typically, if investors start to see that type of outperformance, the shift to passive tends to occur naturally. Our biannual S&P Indices Versus Active Funds (SPIVA®) Scorecards show that, over the long-run, passive outperforms active. That evidence can be compelling for investors looking to limit costs while keeping long-term goals in reach.

3. Liquidity has been a big problem in India historically. Can you talk about the effectiveness of liquidity enhancement programs where secondary market transactions are persistently low? What have similar markets done to boost liquidity that we could also consider?

Tyler: ETF market makers exist to help create an efficient, liquid trading market. Liquidity enhancement programs exist globally and have historically proven effective in developing liquidity for new and lesser-known products. These programs are really only one piece of the liquidity puzzle though. Something as simple as analyst coverage and increased communication to the target investor base can usually go a long way in helping to build and sustain liquidity.

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TalkingPoints: ESG Access Continues to Evolve in Mexico – Get to Know the S&P/BMV Total Mexico ESG Index

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Silvia Kitchener

Director, Global Equity Indices, Latin America

To address the need for a broad market ESG benchmark in Mexico, S&P Dow Jones Indices (S&P DJI) and the Mexican Stock Exchange (BMV) joined forces to launch the S&P/BMV Total Mexico ESG Index. S&P DJI’s Silvia Kitchener and BMV’s Rubén Perera sat down to discuss how this innovative index captures a more complete picture of ESG in Mexico and how it could be used to address growing demand for ESG solutions in the region.

  1. We know that there are many types of environmental, social, and governance (ESG) indices. What is the objective of the S&P/BMV Total Mexico ESG Index?

    Silvia: That is correct; there are various ESG indices with different objectives. Some indices use the “best-in-class” approach like the Dow Jones Sustainability MILA Pacific Alliance Index, which selects the top 30% of companies by sustainability score within each GICS® sector. Then, we have the S&P ESG Indices, which are designed to provide improved ESG representation while maintaining similar overall industry group weights as their underlying indices as in the case of the S&P 500® ESG Index vis-à-vis the S&P 500. In a way, the S&P/BMV Total Mexico ESG Index is a hybrid of the “best-in-class” approach and the S&P ESG Indices framework.

    In essence, the index seeks to represent the Mexican equity market, featuring companies with the highest sustainability scores within each GICS sector, while also seeking to improve its ESG profile and maintain similar overall industry group weights as the S&P/BMV Total Mexico Index.

  2. Why are you launching an ESG index in Mexico now?

    Silvia: We’ve found that in Mexico right now, there is great appetite for information on ESG. The concept of sustainable investing has been around for quite some time—our oldest ESG indices, the Dow Jones Sustainability Indices (DJSI), go back to 1999. Since then, there has been a growing interest in ESG, and it has especially picked up in the past few years. The BMV launched a sustainable index in 2011 that helped bring the concept of sustainability to the market, but now issuers, asset managers, asset owners, and regulators are actively participating in the process. Many are looking for ESG tools that are sharper than the first generation of ESG indices. Thanks to advancements in ESG data and continued innovations in indexing, we’re able to meet this demand with an index built on deeper datasets.

  3. What has demand for ESG looked like in recent years, and how important do you think ESG will be moving forward?

    Rubén: Demand has definitively increased in recent years. Global investors have integrated portfolios and investment strategies based around the three pillars of sustainability. Some of the largest firms have announced a series of initiatives to position sustainability at the center of their investment strategy, making it an integral piece in the construction of portfolios and risk management, so there is a change in the collective consciousness. Nowadays, not only are companies’ returns evaluated, but there is also a legitimate conscious effort to examine how companies gained their returns and the impact of their activities on our society and the environment. There is a genuine concern from companies to manage resources wisely, because that is what many investors are looking for.

    Specifically, at BMV, we have a full commitment to corporate responsibility. We are a benchmark within the Mexican financial market, and we have developed various ESG initiatives including: launching the S&P/BMV IPC Sustainable Index and green, social, and sustainable bonds, creating the first sustainability guide, strengthening the financial culture, and becoming members of the UN Global Compact and Sustainable Stock Exchanges Initiative.

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