Industry Updates

S&P Dow Jones Indices swaps data provider on ESG index range

Four indices will see their methodology changed

Theo Andrew


S&P Dow Jones Indices (SPDJI) has changed its ESG data provider from Arabesque to Sustainalytics as part of several changes to its suite of ESG indices.

SPDJI will now use the Morningstar-owned company as the provider of United Nations Global Compact data and will now exclude companies that Sustainalytics deems to be non-compliant.

The index provider said the changes were aimed at moving away from the use of a continuous data set – any value within a range – to a discrete data set, which can only be a certain value within a range.

The changes will take place on the S&P ESG index series, the S&P ESG Tilted index series, the S&P Equal Weight ESG Leaders Select indices and the S&P Gender Equality and Inclusion Equal Weight indices.

Elsewhere, SPDJI said it will introduce additional exclusions based on a company's involvement in certain business activities.

The additional exclusions cover oil sands, small arms and military contracting while an expanded exclusion methodology will be introduced for controversial weapons. Tobacco will see its exclusions revised.

It added that significant ownership exclusions will no longer be applied for categories where the direct level of involvement threshold is non-zero.

“This change aims to avoid situations where companies could potentially end up being treated more harshly, as a result of the level of their indirect involvement, than they would be for their direct involvement,” SPDJI said.

The index provider said changes were implemented on 2 May. Companies will face an eligibility check for business involvement and UNGC exclusions every quarter.

The changes will affect several ETFs including the $1.9bn Invesco S&P 500 ESG UCITS ETF (SPXE) and the $2.8bn UBS S&P 500 ESG UCITS ETF (SPES).

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