Index provider S&P Dow Jones Indices (S&P DJI) and the New Zealand (NZX) announced today the launch of the S&P/NZX 50 Portfolio ESG Tilted Index, an ESG-focused index based on the float-adjusted market capitalization capped version of the flagship NZX benchmark.
S&P/NZX 50 Portfolio ESG Tilted Index uses the universe of stocks from the S&P/NZX 50 Portfolio Index, which is comprised of the same constituents as the S&P/NZX 50 Index, applying a 5% cap on the float-adjusted market capitalization.
In order to create an ESG-enhanced version of the benchmark, S&P DJI AND NZX new index adjusts the weights of constituents based on their respective S&P DJI ESG Score. In addition, S&P/NZX 50 Portfolio ESG Tilted Index applies eligibility criteria based on companies’ business activities and their alignment with the UN Global Compact (UNGC) Principles, with companies producing controversial weapons, thermal coal, and tobacco excluded from the index, as well as companies in sectors including casinos, gambling, and energy.
Jaspreet Duhra, Global Head of ESG Indices at S&P Dow Jones Indices said:
“We are pleased to collaborate with the NZX on the launch of this innovative index to support the growing interest in sustainability factors from investors in the New Zealand market. With the heightened focus on the impact of companies’ environmental, social and governance (ESG) footprints, this index serves as an independent and transparent tool in measuring ESG performance as more investors incorporate sustainability targets in their investment decisions.”
According to NZX Chief Executive Mark Peterson, the five-year annualized return of the new index which was measured to June 2021 has outperformed the S&P/NZX 50 Portfolio Index as more NZX-listed companies become increasingly focused on ESG performance. Peterson said:
“An important role for New Zealand’s Exchange is to ensure capital can be invested with confidence into companies that provide opportunities for sustainable growth. There is a real interest and growing focus on ESG, and this index now provides a performance benchmark for the development of products that the market is demanding. Investors will have more choice and, importantly, another lens on the New Zealand market, that allows them to retain diversification while giving more weight to high-ESG performance companies”
“We also see this as further rewarding and encouraging the focus on disclosing and discussing companies’ approaches to sustainability and how they are managing ESG risks and opportunities. The performance of companies who advance will be reflected in improved weightings in the index.”