FTSE KLD Global Sustainability ex US Index
Methodology
Index Construction
The eligible universe for the FTSE KLD Global Sustainability ex US Index includes companies that comprise the top 75% of the market capitalization of each sector in each country of the S&P Developed BMI Ex-US.
KLD uses a common global rating and analysis system to evaluate the environmental, social and governance (ESG) performance of each company in the eligible universe. KLD then ranks companies by regional sector peer group according to ESG performance. To generate comparative sector rankings, KLD identifies key ESG performance indicators for each sector and weights them accordingly.
| 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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To maintain sector neutrality, the GSIN Committee selects the highest-ranked companies that that comprise 37.5% of the market capitalization of each sector in each region. Due to various constraints, not all regional sectors will hold exactly 37.5% of the available market capitalization.
The GSXU eligible universe includes companies from 24 developed market countries and is not constrained to match country representation in the eligible universe or in the S&P Developed BMI.
Index Reconstitution
The GSXU is reconstituted at the beginning of November to reflect changes made to the S&P Developed BMI, which reconstitutes annually at the beginning of October.
Index Maintenance
The GSIN Committee is responsible for all changes to the GSXU and is committed to keeping turnover on the Index as low as possible and in line with the turnover of the S&P Developed BMI Ex-US. To that end, the Committee attempts to minimize the number of discretionary changes to index holdings between annual reconstitutions.
The Committee continually monitors the GSXU constituents for events that would require changes to index composition. These events include: corporate actions, changes in ESG performance and deteriorating financial quality.
Mergers & Acquisitions
For mergers or acquisitions involving two GSXU constituents, the resulting entity will remain on the Index. If a constituent company acquires a non- constituent, or if a non- constituent acquires a constituent, the GSIN Committee will evaluate the eligibility of the resulting entity for inclusion on the Index.
Discretionary Removals
On a quarterly basis (January, April, July, and at reconstitution), the GSIN Committee conducts a comprehensive ESG performance review of the holdings of the Index.
The GSIN Committee may remove a company from the Index at any time due to significant deterioration in ESG performance. The GSIN Committee maintains a Watch List comprised of companies whose standing on the Index is tenuous due to a decline in ESG performance.
IPOs
Companies with Initial Public Offerings (IPOs) added to the S&P Developed BMI Ex-US between reconstitutions are only considered for the GSXU at annual reconstitution. This ensures that KLD has sufficient information on the ESG performance of a company upon which to base its decision.
Bankruptcy & Delisting
The GSIN Committee will remove GSIN companies that are liquidated, or undergoing reorganization related to bankruptcy, or delisted from a major stock exchange, following the procedures employed by S&P. Companies are not eligible for inclusion in the Index until one year after emerging from bankruptcy
For information on FTSE KLD Global Sustainability ex US Index analytics, licensing and redistribution contact Indexes@kld.com.
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