Frequently Asked Questions
What is the KLD Global Climate 100 Index?
Who created the Index and why?
How many companies are in the KLD Global Climate Index?
How many countries are represented in the KLD Global Climate Index?
What sectors are represented in the Index?
How was the Index constructed?
What financial criteria are used to qualify companies for the Index?
How is the index weighted?
How is the Index maintained?
What determines turnover of the Index?
Are the constituents of the KLD Global Climate 100 Index "socially responsible" companies?
Are nuclear companies included in the index?
What is Clean Technology?
What is Climate Change?
What are Future Fuels?
What is Global Warming?
What are Greenhouse Gases?
What is Renewable Energy?
Can I be notified of changes to the Index?
How can I invest in 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 KLD Global Climate 100 Index?
The KLD Global Climate 100 Index (GC100), launched in July 2005, is a specialty index designed to promote investment in global companies whose activities demonstrate the greatest potential for mitigating immediate and long-term causes of climate change. KLD’s Global Climate 100 Index is designed for investors seeking a specialized strategy for investing in these types of companies.
Who created the Index and why?
KLD Research & Analytics developed the Global Climate 100 Index in partnership with the Global Energy Network Institute (GENI), a non-profit research and education organization. The Index was created in response to growing demand from institutions and individuals for investment strategies that address climate change issues. The purpose of the Index is to promote and track the performance of companies leading the private sector's response to climate change.
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How many companies are in the KLD Global Climate Index?
The Index includes 100 companies that KLD expects will provide near-term solutions to global warming while offsetting the longer-term impacts of climate change through renewable energy, alternative fuels, clean technology, and efficiency.
How many countries are represented in the KLD Global Climate Index?
Companies in the Global Climate 100 come from 16 countries, reflecting a broad geographical distribution. Fourty-seven percent of the companies are from North America, 33% from Europe and 20% from the Asia-Pacific region.
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What sectors are represented in the Index?
KLD recognizes that companies from all sectors have a part to play in reducing climate change, and tries to reflect that diversity of contributions in the Index. Therefore, the Global Climate 100 includes companies from a broad range of sectors – including oil, automotive, consumer products, utilities, and financial services. The Global Climate 100 Index is more diversified than benchmarks for the renewable energy industry or the conventional energy sector.
How was the Index constructed?
The Global Climate 100 Index is comprised of 100 companies demonstrating a commitment to developing climate change solutions. Companies are selected for their involvement in the following categories: Renewable Energies, Future Fuels, and Clean Technology and Efficiency.
KLD considers each company’s eligibility for the Index based upon its classification in the above categories, specific climate related efforts, market influence, geographic distribution and offsetting negative climate impacts. The leading companies in each category are included on the index. By tracking the performance of these corporate leaders, the Index identifies investment opportunities presented by climate change.
KLD's strategy is to include a diversified group of large-, mid-, and small-cap companies representing sectors ranging from energy and utilities to industrials and consumer products. In so doing, the index takes advantage of the variety of corporate responses while building in broader diversification than that of a traditional energy sector index.
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What financial criteria are used to qualify companies for the Index?
KLD evaluates the financial viability of potential candidates using measurements of size (minimum 12-month trailing average market-cap of $200 million) and liquidity (minimum 12-month trailing average price of $2).
How is the index weighted?
The KLD Global Climate 100 Index allocates 1% to each of the 100 holdings. Equal weighting assures that large-cap companies do not unduly influence the performance of the index and to channel capital to small companies committed to preventing global climate change. This provides higher exposure to small-cap companies and lower exposure to large-cap companies than a cap-weighted index. Each quarter, KLD rebalances the Index to bring each holding back to 1%.
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How is the Index maintained?
KLD continuously monitors constituents on the Index to ensure they meet standards for involvement themes, liquidity and financial viability. KLD may remove companies due to corporate actions resulting in mergers, acquisitions and bankruptcies. KLD may also remove companies at rebalancing if their climate rating falls below an acceptable level. KLD rebalances the Index each quarter to bring each holding back to 1%.
What determines turnover of the Index?
The majority of index changes are attributable to corporate actions occurring throughout the year.
KLD limits turnover on the Index by restricting discretionary changes to the time of quarterly rebalance.
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Are the constituents of the KLD Global Climate 100 Index "socially responsible" companies?
The Index holds companies that are leaders in responding to concerns raised by climate change, including oil, utility and automobile companies that might be excluded from other SRI portfolios. KLD acknowledges the negative aspects of such companies and seeks to identify those with the strongest stories in the context of the climate issue.
KLD also recognizes that large, integrated companies bring strong market capacities to ascendant or underutilized technologies, in spite of concerns associated with their core business. For controversial industries such as oil, involvement in renewables or clean technology may account for only a small percentage of the companies’ total business, but sheer scale allows them to control a large share of the market and provide significant resources to technologies that have a positive impact on climate issues. For example, BP and Toyota command major shares of their respective alternative markets -- BP in solar and Toyota in hybrid vehicles -- although devoting a minor investment relative to their primary businesses.
The Global Climate 100 balances the contributions of the large companies with small climate-friendly lines of business and small, pure-play companies by giving them equal weight in the Index. Relative to a capitalization-weighted index, this discounts the impact of large companies and features the small companies. While there are many companies to choose from, the KLD Global Climate 100 captures the broad range of involvement in different sectors, making the index representative of the universe of companies that will contribute to resolving the climate change question.
What screens does the Global Climate 100 Index utilize?
The index has no standard exclusions such as nuclear energy, tobacco, or military contracts. Companies associated with significant social and environmental controversies, however, can be excluded at KLD’s discretion.
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Are nuclear companies included in the index?
The Global Climate 100 Index is neutral on nuclear power, neither promoting it nor excluding it in this context. Some of the most important corporate leaders on the climate change issue have nuclear involvement. While KLD’s neutrality may dismay both advocates and opponents of nuclear power, the Index’s focus is on promoting renewables and clean technologies.
What is Clean Technology?
Clean Technology is technology that reduces or avoids creating energy related emissions of greenhouse gases into the atmosphere. In other contexts, the term is applied to technologies that reduce water and hazardous materials pollution.
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What is Climate Change?
Climate change refers to significant, long-term shifts in the underlying drivers of weather patterns and average global temperature. Scientists posit that emissions from human activities could cause radical and inhospitable changes in global climate over hundreds of years.
What are Future Fuels?
Future fuels include natural gas, gas-to-liquids, biofuels, hydrogen for fuel-cells, landfill methane, and other liquid or gaseous alternatives to coal and petroleum.
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What is Global Warming?
Global warming is the warming of average temperatures around the world resulting from the accumulation of heat-trapping gases in the earth’s atmosphere. Such warming has been linked to stronger hurricanes and severe drought as well as permanent changes in climate.
What are Greenhouse Gases?
Greenhouse gasses are a series of gases known to trap the sun’s heat in the earth’s atmosphere, the chief among which are carbon dioxide, methane, nitrous oxide, and certain man-made fluorocarbons.
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What is Renewable Energy?
Renewable energy is energy derived from biomass, geothermal sources, hydroelectric dams, solar radiation, ocean tides and waves, and wind.
Can I be notified of changes to the Index?
KLD does not provide advanced notification of additions to or removals from its indexes. However, for a fee one can subscribe to daily constituents lists. Please contact indexes@kld.com for more information.
How can I invest in the Index?
KLD Indexes is a division of KLD Research & Analytics and does not manage 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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Can I start a mutual fund or an ETF based on the Index?
KLD offers clients a variety of licensing opportunities for the KLD Global Climate 100 Index. The Index can serve as the basis for mutual funds, exchange-traded funds and separately managed accounts.
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. Please contact indexes@kld.com.
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