The Dow Jones Sustainability Index is one of the largest sustainability indices. It uses a set of industry-specific criteria considered material to investors and representing a balance of environmental, social and governance indicators.
Established in 1999, DJSI was the first sustainability benchmark to track the stock performance of the world’s foremost publicly traded companies through ESG criteria. The index has since grown into a family of indices, maintained by S&P Dow Jones Indices, with the DJSI World Index at the head. Other indices in the family are regionally or nationally focused.
SAM, a business unit of S&P Global formerly called RobecoSAM, a Swiss sustainability investment research firm, invites 5,000 companies (up to 3,600 companies from the DJSI and 1,400 from the S&P ESG Index series) to complete a corporate sustainability assessment questionnaire. The questionnaire is conducted in two groups – DJSI plus Japan S&P 500 ESG, and S&P ESG excluding Japan.
A portion of the questions are industry-specific, which allows for a “best-in-class” comparison with companies in the same sector.
The responses are collated and published into a database of financially material sustainability information. The top 2,500 are eligible for inclusion in the DJSI World Index and the rest qualify for inclusion in the regional indices.
A company’s sustainability performance is awarded a score between zero and 100 by the index committee, which also considers company-related media, both positive and negative. The highest-performing 250 companies across all industries are what makes the DJSI World Index.
DJSI is weighted on a free-float market capitalization basis. Market capitalization is derived by multiplying the share price by the number of shares available on the market.
A free-float adjusted index calculates the market capitalization of its traded companies by the value of only the shares available to the public (free-float) market and excludes “closely” or “strategically held” shares held by employees, founders, governments and affiliates.
The reporting period is from April 3 until May 28. Companies listed in the DJSI World are reevaluated yearly, with scoring starting in March and results published in September, when the index is adjusted.
The DJSI World Index includes or has included corporations such as Alphabet Inc. (the parent company of Google), Bank of America and Microsoft, all of which claim varying degrees of carbon neutrality.
In 2020, information technology companies represented the largest sector group at 25.3% of listings, followed by healthcare at 21.3% and financial companies at 12.3%. Almost half of the DJSI World Index’s weight by market capitalization is from companies based in the United States.
A company can be removed from the list by the evaluation committee for a number of reasons, including if it has:
- Not demonstrated improvement or adjustment to its ESG strategy in the past 12 months, creating an impetus for them to be proactive in their sustainability efforts.
- Not behaved in accordance with sustainability guidelines.
- Exposure to alcohol and tobacco, gambling, arms, nuclear power and adult entertainment.
The latest Index methodology can be found here.