Frequently Asked Questions
What is the KLD Global Sustainability Index?
What is the KLD Global Sustainability Index family?
What universe does the Index utilize?
How is the Index constructed?
How is the GSI maintained?
How many countries are in the eligible universe for the Index family?
How many companies are in the KLD Global Sustainability Index?
How many companies are in each of the regional sub-indexes?
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 GSI constituents?
How can I invest in the KLD Global 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 Global Sustainability Index?
The KLD Global SustainabilitySM Index (GSI or “The Index”) is a diversified global benchmark constructed using environmental, social and governance (ESG) factors as selection criteria. The Index holds the top ESG-ranked companies by sector in each of three regions: North America, Europe and Asia-Pacific.
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What is the KLD Global Sustainability Index family?
- KLD Global Sustainability Index
- KLD Global Sustainability Index Ex-US
- KLD North America Sustainability Index
- KLD Europe Sustainability Index
- KLD Asia Pacific Sustainability Index
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What universe does the Index utilize?
The GSI utilizes the S&P / Citigroup Broad Market World Index, the most complete index in the S&P / Citigroup Global Equity Index Series.
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How is the Index constructed?
The GSI Committee uses a three-step screening process to select index constituents:
- Companies in the eligible universe are rated by KLD and its research partners on their environmental, social and governance performance. These companies are then divided based on their respective regions: Europe, Asia Pacific and North America.
- The highest-ranking companies that comprise 37.5% of the market capitalization of each sector in each region of the eligible universe are then selected.
- Finally, the regional indexes are aggregated to create the Global Index.
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How is the GSI 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 Global Sustainability Index. The Committee also reconstitutes the GSI each year based on an updated ranking of the eligible universe of companies. KLD announces the reconstituted GSI on the first business day of November each year.
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How many countries are in the eligible universe for the Index family?
There are 25 developed market countries in the eligible universe for the KLD Global Sustainability Index.
- Australia
- Hong Kong
- Japan
- New Zealand
- Singapore
- Austria
- Belgium
- Canada
- Denmark
- Finland
- France
- Germany
- Greece
- Iceland
- Ireland
- Italy
- Luxembourg
- Netherlands
- Norway
- Portugal
- Spain
- Sweden
- Switzerland
- United Kingdom
- United States
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How many companies are in the KLD Global Sustainability Index?
For the most current number of companies, please see the GSI Fact Sheet.
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How many companies are in each of the regional sub-indexes?
For the most current number of companies by region, please see the GSI 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 GSI tracks a traditional benchmark. By making the GSI sector neutral, KLD reduces the expected tracking error of the GSI and eliminates one factor contributing to financial risk.
To achieve sector neutrality, KLD includes the top 37.5% of the market capitalization of each sector in each region of the S&P/Citigroup BMI World. 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 GSI 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 Global 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.
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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