FTSE KLD US Small Cap Sustainability Index
Methodology
Index Construction
The FTSE KLD US Small Cap Sustainability Index (USSS) is one of three sub-indexes in the FTSE KLD US All Cap Sustainability Index (USSA) series, which includes a benchmark index (FTSE KLD US All Cap Sustainability Index), three sub-indexes (FTSE KLD US Large Cap Sustainability Index, FTSE KLD US Mid Cap Sustainability Index, FTSE KLD US Small Cap Sustainability Index) and two composite indexes (FTSE KLD US Large-Mid Cap Sustainability Index, FTSE KLD US Small-Mid Cap Sustainability Index).
The USSS holds companies with the highest environmental, social and governance (ESG) rankings in each sector of 2,000 small cap US equities. KLD ranks companies by sector peer group according to ESG performance ratings. For each sector, key ESG performance indicators are identified and are given more weight in the rating process.
The USSS favors corporations that are:
- Strong stewards of the environment;
- Devoted to serving local communities and society generally;
- Committed to high labor standards for their own employees and those in their supply chain;
- Dedicated to producing high quality and safe products;
- Managing their company in an exemplary and ethical manner
All companies selected for the USSS must meet minimum ESG performance standards, as determined by KLD’s Sector Teams and USSA Committee. KLD recognizes that many companies will have some ESG concerns and gives careful consideration to how companies address the risks and opportunities they face in the context of their sector or industry and relative to their peers.
KLD’s objective is to select the highest-ranked companies targeting 65% of the market capitalization of each sector. This process provides the constituents for the USSS.
Index Reconstitution
The USSS reconstitutes every year on the third Friday of June to reflect changes to the US equity market and changes to companies’ ESG performance.
Index Maintenance
The USSA Committee, which covers all indexes in the series, is responsible for all changes to the Index and is committed to keeping turnover on the Index as low as possible and in line with general market turnover. To that end, the Committee attempts to minimize the number of discretionary changes to index holdings between annual reconstitutions. KLD continually monitors the USSA series for events that would require changes to index composition. These events include: corporate actions, changes in ESG performance and deteriorating financial quality. For all non-ESG related removals KLD follows the procedures employed by FTSE Group, the Index calculator.
For Information on FTSE KLD US Small Cap Sustainability Index Analytics, Licensing and Redistribution contact Indexes@kld.com.
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