- 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.
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.