Frequently Asked Questions
What is the KLD Europe Sustainability Index?
What universe does the Index utilize?
How is the Index constructed?
How is the ESI maintained?
How many countries are represented in the eligible universe for the Index?
How many companies are in the KLD Europe Sustainability Index?
What is “Sector Neutrality”?
Does KLD consider all constituents of the Index to be “socially responsible” companies?
How does KLD define “sustainability”?
What ESG factors are used in the selection process of APSI constituents?
How can I invest in the KLD Europe Sustainability Indexes?
How can I obtain a list of constituents of the Indexes?
Can I start a mutual fund or an ETF based on the Index?
How can I obtain analytics for portfolio performance measurement and attribution?
What is the KLD Europe Sustainability Index?
The KLD Europe SustainabilitySM Index (ESI or “The Index”) is a diversified regional benchmark constructed using environmental, social and governance (ESG) factors as selection criteria. The Index holds the top ESG-ranked companies by sector in the Europe region.
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What universe does the Index utilize?
The ESI utilizes the S&P / Citigroup Broad Market Index Europe.
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How is the Index constructed?
First, KLD and its research partners rate the environmental, social and governance (ESG) performance of each company in the eligible universe. The GSI Committee then selects the highest ranked companies that comprise 37.5% of the market capitalization of each sector in the Europe region.
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How is the ESI maintained?
The GSI Committee is responsible for monitoring the holdings to ensure there are no major events that would require removal of a company from the KLD Europe Sustainability Index. The Committee also reconstitutes the ESI each year based on an updated ranking of the eligible universe of companies. KLD announces the reconstituted ESI on the first business day of November each year.
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How many countries are represented in eligible universe for the Index?
There are 18 developed market countries represented in the KLD Europe Sustainability Index eligible universe:
- Austria
- Belgium
- Denmark
- Finland
- France
- Germany
- Greece
- Iceland
- Ireland
- Italy
- Luxembourg
- Netherlands
- Norway
- Portugal
- Spain
- Sweden
- Switzerland
- United Kingdom
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How many companies are in the KLD Europe Sustainability Index?
For the most current number of companies, please see the ESI Fact Sheet.
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What is “Sector Neutrality”?
A portfolio is sector neutral when its sector weights match those of the underlying market. Sector bias occurs when the sectors weights in an index or investment portfolio vary from those in the underlying market. SRI and sustainability indexes are often compared to unscreened market benchmarks (such as the S&P 500 or the S&P/Citigroup BMI World) to evaluate risk and return differences.
Sector bias contributes to financial risk, as measured by tracking error – in this case, how closely the ESI tracks a traditional benchmark. By making the ESI sector neutral, KLD reduces the expected tracking error of the ESI and eliminates one factor contributing to financial risk.
To achieve sector neutrality, KLD selects the top 37.5% of the market capitalization of each sector in the Europe region. This process creates a sustainability index that is expected to closely track the global market while exhibiting a strong sustainability identity.
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Does KLD consider all constituents of the Index to be “socially responsible” companies?
KLD evaluates companies on the GSI based on a broad range of ESG issues. Companies included on the GSI have taken an industry leading position on issues relevant to its sector. KLD is aware that holdings in the GSI may not meet the standards of all socially responsible investors.
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How does KLD define “sustainability”?
Sustainability refers to the degree to which a company addresses the social and environmental needs of the present without compromising the quality of life of future generations.
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What ESG factors are used in the selection process of APSI constituents?
KLD uses a variety of factors including those listed in the following table. KLD’s GSI Committee identifies and applies key ESG performance indicators to formulate the rankings for each sector.
| Environmental, Social and Governance Factors |
Environment |
Social |
Governance |
| Policies and Mgt. Systems |
Employees |
Governance Structure |
| Products & Services |
Contractors & Supply Chain |
Business Ethics |
| Natural Resource Use |
Customers |
Transparency & Reporting |
| Climate Change |
Communities & Society |
Shareholder Relations |
| Waste & Emissions |
|
|
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How can I invest in the KLD Europe Sustainability Indexes?
KLD Indexes is an independent index provider and does not mange any funds or money. However, KLD indexes are licensed as investable products for individuals and institutions.
For a complete list of products based on KLD Indexes, please see the Product Fact Sheet.
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How can I obtain a list of constituents of the Indexes?
To purchase a current list of constituents, or to subscribe to constituent lists for one or more KLD indexes, please contact indexes@kld.com.
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Can I start a mutual fund or an ETF based on the Index?
Please contact us at indexes@kld.com to discuss licensing opportunities.
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How can I obtain analytics for portfolio performance measurement and attribution?
KLD can provide clients with index data to measure portfolio performance and conduct attribution analysis. Please contact indexes@kld.com.
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