S&P Dow Jones Indices Launch Smart Beta ESG Index

Environmental, social and governance (ESG) and factor-based investing are two themes gaining traction among institutional investors. Pension investors like APG incorporate ESG into its investment criteria and process. On March 30th, S&P Dow Jones Indices launched a smart beta ESG index. The DJSI Ethical Europe Low Volatility Index combines two investment themes into a singular index. The DJSI Ethical Europe Low Volatility Index will measure the performance of the 50 least volatile stocks within the Dow Jones Sustainability Europe Index. The index will exclude alcohol, tobacco, gambling, armaments and firearms and the Adult Entertainment Index.

Sovereign wealth funds like the Kuwait Investment Authority (KIA) are prohibited from investing in alcohol and gambling stocks, and given the interest in factor-based investing, it could attract both Gulf sovereign funds and Dutch pensions. Furthermore, sovereign funds like the New Zealand Superannuation Fund (NZSF) believe ESG factors are material in achieving large investment returns – according to reports.

S&P Dow Jones Indices has licensed the index to Commerzbank AG.

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