Frequently Asked Questions
What is the Domini 400 Social Index?
Who created the Index and why?
Does the DS400 try to copy the S&P 500?
How many companies are in the Index?
Is there a minimum size for companies in the Index?
How was the Index constructed?
What screens does the Index utilize?
How is the index weighted?
How is the Index maintained?
Who calculates the index performance and values?
Where can I obtain Index data?
What determines turnover of the Index?
Are the constituents of the Index "socially responsible" companies?
Can I use the Index as an "approved" list?
How can I invest in the DS400?
Is the Domini 400 Social Index the same as the Domini Social Equity Fund?
How can I obtain a list of the constituents in the Index?
Can I be notified of changes to the Index?
Can I start a mutual fund or an ETF based on the Index?
How can I obtain Index analytics for portfolio performance measurement and attribution?
What is the Domini 400 Social Index?
KLD’s Domini 400 SocialSM Index (DS400) is a float-adjusted market capitalization weighted common stock index modeled on the S&P 500 Index. The DS400 is the first benchmark for equity portfolios that apply environmental, social and governance screens. It is a widely recognized and studied benchmark for measuring the impact of ESG screening on financial returns and the performance of screened portfolios.
Top of Page
Who created the Index and why?
KLD Research & Analytics created the Index and launched it in May 1990 as a benchmark for social investors. In addition to providing a vehicle for passive investment products, the Index generates data to answer the question: How does the application of ESG criteria affect the risk and return characteristics of investment portfolios?
Top of Page
Does the DS400 try to copy the S&P 500?
No. KLD created the DS400 as a social investment benchmark – a basket of companies that defines the market for social investors. KLD designed the index to reflect the way social investors select companies to invest in, rather than to copy the S&P. However, the first step in selecting companies for the DS400 was to screen the S&P 500 as a proxy for the universe of large capitalization companies. In 1990, approximately half of the S&P stocks qualified for the Index. KLD’s target for the number of S&P constituents in the DS400 is 250.
Top of Page
How many companies are in the Index?
KLD maintains the Index at 400 companies at all times. Additions are made at the same time as removals.
Is there a minimum size for companies in the Index?
No, but KLD generally seeks to include companies with a minimum market capitalization of $200m.
Top of Page
How was the Index constructed?
KLD first identified the screens, or standards, used by most social investors. These include the avoidance of alcohol, tobacco, gambling, nuclear power, firearms and weapons-related defense contracting. They also include analysis of such areas as community relations, diversity, employee relations, environmental stewardship, human rights, product safety and quality, and corporate governance. About half the S&P 500 companies qualified for the DS400 in KLD's initial screening process. KLD then selected additional companies to bring the total holdings to 400, 100 of which were mid cap companies to get broader industry representation, and 50 small cap companies that were strong models of responsible corporate behavior.
Top of Page
What screens does the Index utilize?
KLD uses a two-step screening process for selecting companies for the DS400. KLD first excludes from consideration companies involved in alcohol, tobacco, firearms, gambling, nuclear power and military-weapons beyond specified revenue thresholds. These companies are not eligible regardless of other social and environmental attributes of these companies.
From the remaining largest 3000 US equities, KLD selects companies for the DS400 that have positive ESG records based on the following issues: environmental stewardship, community relations, diversity, employee relations, human rights, product quality and safety, and corporate governance. KLD evaluates companies in the context of their industry and sector as well as in relation to the broader market.
Top of Page
How is the index weighted?
The DS400 is float-adjusted market-capitalization weighted stock index. Traditional market capitalization weighted indexes determine the weight of each holding as the proportion of its market cap to the total capitalization of the index. Float adjustment more accurately measures market capitalization by reflecting only the shares available to investors rather than the total shares outstanding. Float adjustment reduces the share counts of stocks in the index to eliminate blocks of stocks held by a control group, founding family, another corporation or government. By more accurately measuring the portion of each company’s shares that trade in the market, float adjustment enhances an index’s precision as a market gauge and reliability as an investment vehicle.
Top of Page
How is the Index maintained?
The DS400 is monitored and maintained by a committee that includes KLD’s research director, product development director, senior research analysts and staff from KLD Indexes. The DS400 Committee maintains the Index at 400 companies at all times, adding a company at the same time that another is removed. Companies may be removed from the DS400 due to corporate actions, violation of exclusionary screens or concerns related to performance.
To qualify candidates for addition to the DS400, KLD evaluates the ESG performance of all candidates. KLD considers the following characteristics when selecting holdings for the Index: (i) Companies in the S&P 500 and the largest 3000 US equities that exhibit positive ESG performance. (ii) Companies that have strong ESG performance relative to their peer group and help the Index approximate the sector, industry or market capitalization characteristics of the S&P 500. (iii) Companies on the S&P 500, in cases where an S&P 500 holding has been removed from the DS400.
Top of Page
Who calculates the index performance and values?
The DS400 is calculated by Standard and Poor’s Custom Indices.
Top of Page
Where can I obtain Index data?
Performance and prior month Index constituent changes are available on www.KLD.com. Domini 400 Social Index data is available on Bloomberg under ticker KLDDSI, on Reuters under ticker. KLDDSI and Yahoo! Finance under ticker ^KLDDSI.
Other web sites including SocialFunds.com (www.socialfunds.com) and Christian Science Monitor (www.csmonitor.com/ethicalinvesting) carry daily performance of KLD Indexes.
What determines turnover of the Index?
A substantial majority of index changes are attributable to corporate actions occurring throughout the year. KLD removes companies on a discretionary basis from time to time, either for concerns related to exclusionary screens or for problematic ESG performance. Index turnover ranges from 6%-8% in a typical year, measured on a capitalization-weighted basis comparable to that of the S&P 500.
Top of Page
Are the constituents of the Index the best "socially responsible" companies?
No. Since the screens for the DS400 Index reflect a broad cross section of ESG issues and because the Index is designed to include a broad representation of large companies, not all DS400 holdings will reflect everyone's standards for corporate social responsibility.
Can I use the Index as an "approved" list?
Yes. The DS400 is not meant to be the 400 best companies nor is it the only 400 companies that meet ESG criteria. The DS400 contains 400 companies in the U. S., that, in addition to passing ESG screens reflect the general market behavior of stocks of the average socially responsible investor.
Top of Page
How can I invest in the DS400?
KLD Indexes is a division of KLD Research & Analytics and does not manage any funds. However, KLD Indexes are licensed as investable products for individuals and institutions. The Domini 400 Social Index is licensed to Barclay's Global Investors for an Exchange Traded Fund (ETF), the iShares KLD 400 Social Index Fund (ticker: DSI), and to Green Century Capital Management for a mutual fund, the Green Century Equity Fund (ticker: GCEQX). Other investment firms license the DS400 for managing separate accounts.
For a complete list of products based on KLD Indexes, please see the Product Fact Sheet.
Is the Domini 400 Social Index the same as the Domini Social Equity Fund?
The Domini Social Equity Fund has no relation to the Domini 400 Social Index.
Top of Page
How can I obtain a list of the constituents in the Index?
To purchase a current list of constituents, or to subscribe to constituents lists for one or more KLD indexes, please contact indexes@kld.com.
Can I be notified of changes to the Index?
KLD provides advance notification of additions to or removals from its indexes to index licensees. KLD publishes prior month changes on www.KLDIndexes.com in the middle of every month. Please contact indexes@kld.com for more information.
Top of Page
Can I start a mutual fund or an ETF based on the Index?
KLD Indexes can serve as the basis for mutual funds, exchange-traded funds, separately managed accounts and other institutional products. Please contact indexes@kld.com to discuss licensing opportunities.
How can I obtain Index analytics for portfolio performance measurement and attribution?
KLD can provide clients with index data to measure portfolio performance and conduct attribution analysis. KLD Indexes can be used to measure the financial performance of ESG portfolios and quantify the risk and return characteristics of ESG screened portfolios relative to unscreened market benchmarks. Please contact indexes@kld.com.
Top of Page
|
