Methodology
Index Construction
The eligible universe for the KLD Global Sustainability Index Ex-US includes companies that comprise the top 75% of the market capitalization of each sector in each country of the S&P/Citigroup BMI World 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 GSI 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 GSIXUS 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/Citigroup BMI World.
Index Reconstitution
The GSIXUS is reconstituted at the beginning of November to reflect changes made to the S&P/Citigroup BMI World, which reconstitutes annually at the beginning of October.
Index Maintenance
The GSI Committee is responsible for all changes to the GSIXUS and is committed to keeping turnover on the Index as low as possible and in line with the turnover of the S&P/Citigroup BMI World 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 GSIXUS 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 GSIXUS 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 GSI 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 GSI Committee conducts a comprehensive ESG performance review of the holdings of the Index.
The GSI Committee may remove a company from the Index at any time due to significant deterioration in ESG performance. The GSI 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/Citigroup BMI World Ex-US between reconstitutions are only considered for the GSIXUS 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 GSI Committee will remove GSI 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 KLD Global Sustainability Index Analytics, Licensing and Redistribution contact Indexes@kld.com.
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