ISS ESG Launches SDG-Linked Index Series
Institutional Shareholder Services’ (ISS) responsible investment arm, ISS ESG, announced today the launch of a new series of SDG-linked Indeces, including the Solactive ISS SDG Leaders Index and the Solactive ISS SDG Aligned Index Series.
ISS worked in partnership with Solactive on the new index series, with potential constituents for each series drawn from the Solactive Global Benchmark Series (GBS) of indices. Potential constituents are initially screened by ISS ESG to exclude those with activities involving verified ongoing failures to respect established norms and verified ongoing involvement in controversial weapons. Remaining companies are then selected for inclusion based on ISS’ ESG SDG Impact Ratings,launched earlier this year.
The ISS ESG SDG Impact Rating provides a holistic metric of a company’s impact using the UN SDGs as a reference framework.
SDGs refer to the 17 categories of Sustainable Development Goals (SDGs) adopted by world leaders at the United Nations Sustainable Development Summit in September 2015, with the aim to protect the planet and improve quality of life globally. The SDGs set targets to achieve a broad range of aspirational goals, including ending poverty and hunger, improving education, and protecting the environment.
The SDG Impact Rating measures the extent to which companies are managing negative externalities in their operations across the entire value chain to minimize detrimental impacts, while at the same time taking advantage of existing and emerging opportunities in their products and services to contribute to the achievement of the SDGs. A company’s impact is measured thematically, following the SDG framework, as well as at an aggregate level.
For each of the 17 SDGs, a company’s impact is determined by three pillars – products and services, operations, and controversies. As a result, the SDG Impact Rating provides 120 distinct data points per company, allowing for granular thematic assessments, as well as aggregate impact measurements. The rating and underlying scores are presented on a scale of -10 to +10, allowing categorization according to SDG-related impacts into five groups: significant negative impact, limited negative impact, no impact, limited positive impact, and significant positive impact.
The aim of the The Solactive ISS SDG Leaders Index is to track companies globally with an overall significant positive impact on the SDGs and no negative impact on any of the 17 SDGs.
The Solactive ISS SDG Aligned Index Series tracks various segments of the global stock market based on size and region, and includes only companies with an overall significant or limited positive impact on the SDGs and no significant negative impact on any of the 17 SDGs.
Hernando Cortina, Head of Index Strategy at ISS ESG, said:
“In light of the strong positive market feedback following the launch of the ISS ESG SDG Impact Rating, we are delighted to now facilitate the provision of investable indices drawing on the same unique, holistic methodology.”