Index Construction

The FTSE KLD US All Cap Sustainability Index (USSA) is the benchmark in a series of indexes, which includes three sub-indexes (FTSE KLD US Large Cap Sustainability Index, FTSE KLD US Mid Cap Sustainability Index, FTSE KLD US Small Cap Sustainability Index) and two composite indexes (FTSE KLD US Large-Mid Cap Sustainability Index, FTSE KLD US Small-Mid Cap Sustainability Index).

The USSA holds companies with the highest environmental, social and governance (ESG) rankings in each sector of the 3,000 largest US equities. To select companies for the index, KLD first breaks down the 3,000 largest US equities into large cap, mid cap, and small cap sub-eligible universes. The large cap-eligible universe is comprised of the 400 largest companies; the mid cap-eligible universe is comprised of the next 600 largest companies; and the small cap-eligible universe is comprised of the smallest 2,000 companies.

KLD ranks companies in each sub-eligible universe by sector peer group according to ESG performance ratings. For each sector, key ESG performance indicators are identified and are given more weight in the rating process.

The USSA favors corporations that are:

• Strong stewards of the environment;
  
• Devoted to serving local communities and society generally;
  
• Committed to high labor standards for their own employees and those in their supply chain;
  
• Dedicated to producing high quality and safe products;
  
• Managing their company in an exemplary and ethical manner.
  

All companies selected for the USSA must meet minimum ESG performance standards, as determined by KLD’s Sector Teams and the USSA Committee. KLD recognizes that many companies will have some ESG concerns and gives careful consideration to how companies address the risks and opportunities they face in the context of their sector or industry and relative to their peers.

 KLD’s objective is to select the highest-ranked companies targeting 65% of the market capitalization of each sector in each sub-eligible universe. This process provides the constituents for the three primary sub-indexes of the USSA series: the FTSE KLD US Large Cap Sustainability Index (USSL), the FTSE KLD US Mid Cap Sustainability Index (USSM) and the FTSE KLD US Small Cap Sustainability Index (USSS).

To form the USSA, KLD aggregates the three sub-indexes (USSA, USSM, and USSS).

Index Maintenance

The USSA Committee is responsible for all changes to the Index and is committed to keeping turnover on the Index as low as possible and in line with general market turnover. To that end, the Committee attempts to minimize the number of discretionary changes to index holdings between annual reconstitutions.  KLD continually monitors the USSA for events that would require changes to index composition. These events include: corporate actions, changes in ESG performance and deteriorating financial quality. For all non-ESG related removals KLD follows the procedures employed by FTSE Group Limited, the Index calculator.