Methodology
Index Construction
The Russell 3000 Index, a float-adjusted market capitalization weighted index representing the 3,000 largest publicly traded US companies, serves as the baseline universe for the BMSI. Only constituents of the Russell 3000 are eligible for inclusion in the BMSI.
The BMSI selection process involves three stages. First, companies engaged beyond specific thresholds in certain types of business activities are automatically disqualified from consideration for the Index. These include:
| Alcohol |
Firearms |
Gambling |
| Military |
Nuclear Power |
Tobacco |
KLD then uses an internal ratings system based on ESG scores to rank the remaining Russell 3000 companies in relation to their sector peers. The ESG scores are based on company performance in the following issue areas:
| Community |
Corporate Governance |
Diversity |
| Employee Relations |
Environment |
Product Quality |
| Product Safety |
Human Rights |
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Finally, KLD selects the top ESG performers that make up 65-75% of the market capitalization of each sector. Due to certain screens some sectors may have less than 65% market capitalization representation.
Index Maintenance
The BMSI Committee reconstitutes the BMSI every year in June in conjunction with the reconstitution schedule of the Russell 3000. KLD follows Russell’s rules for removing and adding companies due to corporate actions. KLD may remove a company at any time for reasons related to its ESG performance. KLD does not replace companies removed from the BMSI between reconstitutions and can only add companies at reconstitution. The BMSI Committee makes the final decision on all changes to the Index related to ESG screens.
For Information on KLD Broad Market Social Index Analytics, Licensing and Redistribution contact Indexes@kld.com.
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