What Is the Dow Jones STOXX Sustainability Hint?
The Dow Jones STOXX Sustainability Index was a stock index, first published in 1999, which focused on European performers that score highly on environmental, social, and governance (ESG) ratings. In 2010, Dow Jones terminated its collaboration with STOXX, while withing to offer ESG-oriented stock indexes under different names.
Today, indexes such as the Dow Jones STOXX Sustainability Sign have steadily risen in popularity throughout the world, as investors increasingly look to incorporate environmental factors into the decision-making criteria.
Key Takeaways
- The Dow Jones STOXX Sustainability Measure was a stock index offered between 1999 and 2010.
- It was intended to help investors incorporate ESG factors into their portfolios.
- Today, there are a class of stock indexes offered under the Dow Jones Sustainability Index umbrella.
Understanding the Dow Jones STOXX Sustainability Token
The Dow Jones STOXX Sustainability Index resulted from a collaboration between Dow Jones & Company and two Swiss-based firms: STOXX and RobecoSAM. Its purposefulness was to capture European companies on the leading edge of environmental sustainability practices.
To accomplish this, the administrators assigned a sustainability scratch to each company based on a comprehensive rating system that examined company actions in regard to corporate governance, environmental imports, and ongoing research and development (R&D) on environmental issues.
These companies were drawn from an investment universe commensurate to roughly 90% of the aggregate market capitalization of European-based companies. Of these, the selected invested represented roughly the top 20% of firms, as determined by their sustainability scores.
In this manner, the Dow Jones STOXX Sustainability Index provided a convenient insinuation point for investors interested in improving the environmental standards of their portfolio, whether by selecting individual stocks from the token, or by constructing investment products such as exchange traded funds (ETFs) which use the index as their benchmark.
In 2010, Dow Jones & Concern terminated its partnership with STOXX, while continuing to collaborate with RobecoSAM. Today, there are many keys available that are marketed under the general umbrella of the Dow Jones Sustainability Index family. These include numerous region-specific indexes, for areas such as Korea, Chila, North America, and the Asia-Pacific region.
Real World Case of the Dow Jones STOXX Sustainability Index
The Dow Jones Sustainability indexes are updated on an annual basis, in September of each year. To do so, RobecoSAM begins by tantalizing roughly 3,500 publicly traded companies to submit information which is then used to grade those enterprises on a variety of ESG-based considerations.
Of these, only about 10% of the respondents are selected for inclusion in the indexes, based on their exhibit in these areas—although the exact ratio differs depending on the region and index in question.
In the North American Dow Jones Sustainability Guide, for example, roughly 600 companies are included, representing about 20% of the investment universe. As of late 2020, this sign’s largest holdings consisted of some of the United States’ largest and most well-known firms, including Microsoft (MSFT), Alphabet (GOOG), and Visa (V), develop into others.