The S&P Global BMI: Providing Consistent Insights into Global Equity Markets since 1989

Sector Primer Series: Materials

Transition to a 1.5°C World with the S&P PACT™ Indices (S&P Paris-Aligned & Climate Transition Indices)

Potential Advantages of a Lower Allocation to Energy: The S&P GSCI Light Energy

InsuranceTalks: Why Insurers Are Increasingly Considering Infrastructure Investments as Core

The S&P Global BMI: Providing Consistent Insights into Global Equity Markets since 1989

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John Welling

Director, Equity Indices

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Michael Orzano

Senior Director, Global Equity Indices

Over the past few decades, best practices for global equity benchmark construction have converged on a few key principles.  First, a properly constructed global index series must fully capture the investable equity opportunity set.  In order to do so, it should include large-, mid-, and small-cap companies, incorporate minimum size and liquidity requirements, and be float adjusted so that it only includes shares available for purchase.  Second, it should utilize a modular, building block approach that allows the global opportunity set to be decomposed into subsets without gaps or overlaps.  Last but not least, it should apply a consistent methodology across markets and have continuity in its approach over time.  These principles are critical to ensuring a fair and robust benchmark that can be utilized by market participants to support key aspects of the investment process such as performance measurement, asset allocation, and index replication.

Established in 1989, the S&P Global BMI (Broad Market Index) Series pioneered these core benchmarking principles.  Ahead of its time in many respects, the S&P Global BMI lays claim to a number of important firsts in the global indexing industry; the most important of these being that it was the first to incorporate float adjustment and to include large-, mid-, and small-cap companies in a single modular global benchmark.  As a result, the S&P Global BMI is used by some of the world’s largest and most sophisticated asset managers and asset owners, who value it as a comprehensive and trusted data set.

In this paper, we will cover the following major points.

  • With more than 30 years of seamless history, the S&P Global BMI provides a consistent universe for historical market analysis and back-testing investment strategies.
  • Over the years, other major global equity indices have converged to follow the S&P Global BMI framework—in particular its float adjustment and modular inclusion of large-, mid-, and small-cap securities in a single index series.
  • The S&P Global BMI’s deep small-cap segment provides the most comprehensive measure of global small-cap securities.
  • Differing country classifications for South Korea among major index providers may lead to meaningfully different representations of the emerging market opportunity set.
  • Other competitors’ indices, such as MSCI EAFE, may inadvertently create a gap in coverage by excluding Canadian securities. An alternative, such as the S&P Developed ex-U.S. BMI, eliminates that gap.

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Sector Primer Series: Materials

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Hamish Preston

Director, U.S. Equity Indices

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Sherifa Issifu

Associate, Index Investment Strategy

The Global Industry Classification Standard® (GICS®) assigns a company to a single business classification according to its principal business activity. This assignment uses quantitative and qualitative factors, including revenues, earnings, and market perception. The sector is the first level of the four-tiered, hierarchical industry classification system that includes 11 sectors, 24 industry groups, 69 industries, and 158 sub-industries.

Within the GICS framework, Materials companies include those that are primarily engaged in:

  • Producing and manufacturing chemical products, including industrial chemical products;
  • Manufacturing construction materials, containers, and packaging;
  • Mining metals and the production of related products; and
  • Manufacturing paper and forest products.


The S&P 500® Materials comprises all companies in the S&P 500 that are assigned to the Materials sector by GICS. Created in 1957, the S&P 500 was the first broad U.S. market-cap-weighted stock market index. Today, it is the basis of many listed and over-the-counter investment instruments.

The Materials sector is the smallest by capitalization of the 11 sectors in the S&P 500, representing 2.53% of the index as of May 29, 2020. This compares to 6.04% and 4.95% for the S&P MidCap 400® and S&P SmallCap 600®, respectively. Overall, the Materials sector accounts for 2.72% of (and 146 securities within) the S&P Total Market Index; only the Energy sector (2.70%) accounts for less, by index weight.

With a total float-adjusted market capitalization of USD 641.43 billion, the S&P 500 Materials sector comprised 28 companies as of May 29, 2020. The two largest companies in the sector were Linde plc (LIN) and Ecolab Inc (ECL), with float-adjusted market caps of USD 108.69 billion and USD 53.31 billion, respectively. There were no Materials companies in the top 10 of the S&P 500—Linde plc ranked as the 53rd largest stock, representing 0.43% of the index. The mean market cap of S&P 500 Materials stocks was USD 22.91 billion, the median market cap was USD 13.79 billion, and the lowest market cap was USD 4.23 billion.

The largest five constituents accounted for 48.64% of the weight of the Materials sector, placing it seventh in the S&P 500 in terms of concentration.

Within the S&P 500 Materials, Chemicals was by far the largest industry, accounting for 71.24% of the sector as of May 29, 2020. The remaining sector weight was distributed across the Containers and Packaging (13.13%), Metals and Mining (11.52%), and Construction Materials (4.11%) industries. There were no companies in the Paper and Forest Products industry as of May 29, 2020. The three largest sub-industries were Specialty Chemicals (30.70%), Industrial Gases (25.25%), and Paper Packaging (9.50%)—the first two belong to the Chemicals industry.

A key feature of GICS is that it can evolve: its structure is intended to reflect the current state of the equity investment universe. S&P Dow Jones Indices and MSCI conduct annual reviews to ensure that the structure remains fully representative of the current global market. Although there have been few significant changes to the Materials sector—Chemicals has always been the largest industry, for example—the Paper & Forest Products industry weight in the S&P 500 declined since 1999, from 20% to 0%.

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Transition to a 1.5°C World with the S&P PACT™ Indices (S&P Paris-Aligned & Climate Transition Indices)

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Mona Naqvi

Global Head of ESG Capital Markets Strategy, S&P Global

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Ben Leale-Green

Senior Analyst, Research & Design, ESG Indices

The landmark Paris Agreement marked a sea change in the global fight against climate change. Backed by empirical evidence from the UN Intergovernmental Panel on Climate Change (IPCC), ambition has since grown to limit global temperature rise to 1.5°C since pre-industrial levels.

To date, climate-conscious investors have largely focused on reducing relative portfolio carbon exposure, but divergent methodologies have made fertile ground for so-called “greenwashing.” While point-in-time analyses do not necessarily inform alignment with our needed transition to a low-carbon economy. However, a combination of groundbreaking new datasets and index innovation is emerging. Investors now have the choice to align with a scenario that may mitigate the most catastrophic impacts. The European Union (EU) is in the process of finalizing standards for defining a ClimateTransition Benchmark (CTB) and a Paris-aligned Benchmark (PAB), both of which use absolute measures to align with a 1.5°C trajectory rather than simply a relative carbon reduction. Our S&P PACT Indices offer a powerful set of investment solutions to meet the proposed standards, in addition to other climate objectives. This new breed of sustainable climate indices therefore provides a pathway for investors to:

  1. Go beyond the Paris Agreement and align investments with a 1.5°C trajectory toward achieving net-zero emissions by 2050;
  2. Adopt a strategy compliant with the proposed standards for the EU CTBs and PABs and recommendations from the TCFD—accounting for the physical risks, transition risks, and opportunities arising from climate change; and
  3. Address numerous climate objectives efficiently, while staying as close to the underlying index as possible with broad, diversified exposure.

This paper underscores how the S&P PACT Indices could help investors transition to a 1.5°C world and achieve other climate objectives

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Potential Advantages of a Lower Allocation to Energy: The S&P GSCI Light Energy

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Fiona Boal

Head of Commodities and Real Assets

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Jim Wiederhold

Associate Director, Commodities and Real Assets

S&P Dow Jones Indices (S&P DJI) offers a number of strategies that track various commodities markets.  The most widely recognized of these is the S&P GSCI, which is designed to measure the performance of a broadbased, production-weighted, investable representation of the global commodities market. Energy-related futures make up more than half of the index composition.

For a less-energy-intensive commodity market measure, there is the S&P GSCI Light Energy. It tracks the same designated contracts as the headline S&P GSCI, but it divides its contract production weights in the energy sector by four, increasing the relative weights of other S&P GSCI commodity components. Therefore, the index offers a commodity exposure that is more evenly weighted across the five major commodity sectors: energy, industrial metals, precious metals, agriculture, and livestock.

Exhibit 1 compares the methodologies of the S&P GSCI Light Energy and the Bloomberg Commodity Index (BCOM). These two indices are representations of a more equal-weighted view of commodities markets. Their performance is similar, and due to lower energy weights, each index has shown much less volatility than the headline S&P GSCI.

Potential Advantages of a Lower Allocation to Energy: The S&P GSCI Light Energy Exhibit 1

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InsuranceTalks: Why Insurers Are Increasingly Considering Infrastructure Investments as Core

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

Robert Amodeo is Head of Municipals at Western Asset Management Company, LLC and has more than 30 years of investment experience. Since 2005, Robert has been part of Western Asset’s municipal bond investment team and is the sector head of that group.

S&P DJI: Tell us a bit about your role at Western Asset Management Company and how you serve the insurance space?

Robert: At Western Asset, I lead a team of investment professionals including portfolio managers, research analysts, and quantitative analysts with an average of 27 years of experience in the muni market. Our investment philosophy at the firm is centered around a long-term, fundamental value approach and this is woven into the portfolios we manage for insurance clients. Our firm manages over USD 85 billion of insurance company mandates for U.S. and international companies across business lines, including life, health, property/casualty, and reinsurance. Our muni portfolios reflect the unique objectives and constraints ranging from full discretion, total return focused clients to book yield focused clients that are constrained by capital, regulatory, and accounting considerations.

S&P DJI: Fixed income comprises a significant portion of insurers’ portfolios.What trends have you seen in terms of asset allocation within this sector in recent years?

Robert: Two trends we have been seeing in munis is the search for yield and the growing allocation in taxable bonds. Book yields have declined since the global financial crisis and many of our clients partner with us to generate yield for their general account assets via yield curve management, sector allocation, and security selection. We look to add value to their portfolios by capitalizing on opportunities in undervalued securities, out of favor industries, trading inefficiencies, and rising stars.Since December 2011, the aggregate market value and number of issues in the S&P Taxable Municipal Bond Index have grown 39% and 42%, respectively. A combination of factors including tax reform, relative value, and good capital treatment have also spurred interest from U.S. and international insurance companies in taxable munis.

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