Solactive collaborates with ISS ESG to release Solactive ISS SDG Leaders Index based on the 17 United Nations’ Sustainable Development Goals..
Timo Pfeiffer, Chief Markets Officer at Solactive
In 2015, all member states of the United Nations adopted the UN’s 2030 Agenda for Sustainable Development. This proposal serves as a fundamental concept for a peaceful and prosperous society, and contains, at its core, 17 Sustainable Development Goals, including, for example, Zero Hunger, Quality Education, and Gender Equality. To enable conscious investors to leave a positive impact on the planet in accordance with the UN’s Sustainable Development Goals, Solactive and ESG provider ISS ESG teamed up to develop an index containing only those companies actively engaging with the important goals.
As the basis universe for the Solactive ISS SDG Leaders Index serves the Solactive GBS Global Markets All Cap USD Index, which is a broad market benchmark including more than 11,000 stocks from 24 developed and 26 emerging markets countries. First, the index methodology intends a strict exclusion of both companies involved in the manufacture or application of controversial weapons and companies with a verified failure to respect established norms such as human or labour rights. Also, companies that fail to provide sufficient information concerning compliance with these norms and business practices are automatically excluded to ensure compliance of the remaining company pool.
After these baseline exclusions, companies are selected based on their overall and single SDG Impact Rating, which is a proprietary evaluation concept by ISS ESG. The SDG Impact Rating utilizes the United Nations’ SDGs as a reference point and values both a company’s negative and positive impact on the SDGs by taking into account a corporate’s effort to avoid negative externalities in the whole value chain as well as the utilization of established or developing measurements to contribute to the fulfilments of the United Nations’ SDGs.
Each company is evaluated with regard to its products and services, operations, and controversies for every one of the 17 SDGs. For each goal, the respective company will be ranked on a scale ranging from -10 to +10, and to qualify for inclusion in the index, a company must at least score an overall SDG Impact Rating of > 5.0. Additionally, a company is not allowed to have a negative impact on the 17 SDGs, meaning it is not allowed to have a single SDG Impact Rating of < -0.1.
“From my point of view, the most pervasive impact of the UN’s SDGs is that they provided a common and tangible framework helping to generate global awareness around ESG and sustainability among both the broader public and financial professionals,” comments Timo Pfeiffer, Chief Markets Officer at Solactive. “Making those principles investible incentivizes those companies actively engaging with social responsibility while downgrading non-compliant companies, which is a beneficial effect.”
“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,” said Hernando Cortina, Head of Index Strategy at ISS ESG.