Frequently Asked Questions
What is the KLD Social Select Index?
Who created the Index and why?
How are the scores of the companies on the KLD SSI determined?
Can I view the company scores on the KLD SSI?
How many companies are in the Index?
What universe does the Index utilize?
What screens does the Index utilize?
How is the index weighted?
How is the Index maintained?
Who calculates the index performance and values?
How large is turnover for the Index?
Are the constituents of the Index "socially responsible" companies?
How is the Index different from other social investment indexes?
How can I obtain a list of the constituents in the Index?
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 Social Select Index?
The KLD Select SocialSM Index is constructed to maximize exposure to positive social and environmental factors while exhibiting risk and return characteristics similar to those of the Russell 1000® Index. The Index is sector-diversified, holding companies with the highest social and environmental scores from each sector. To adhere to a large capitalization style, the eligible universe is limited to companies in the Russell 1000 and S&P 500® Index. Tobacco companies are not eligible.
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Who created the Index and why?
KLD created the Index to address one of the principal barriers facing socially responsible investment: the reluctance of institutional investors to adopt SRI strategies because of their desire for diversification across the market. Many institutions believe that traditional SRI screening that excludes industries such as nuclear power, gaming and defense introduces additional risk into their portfolios. The KLD Select Social Index responds directly to this fiduciary concern by selecting companies representing every industry (except tobacco), modifying their weights based on their relative social and environmental scores, and explicitly limiting risk exposure. The Index provides investors an effective means of integrating social and environmental factors into their investments. Funds based on the Index provide investors the opportunity to influence a broad spectrum of large-cap companies through shareholder engagement.
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How are the scores of the companies on the KLD SSI determined?
The scores are derived from the ratings awarded to a company in its social and environmental profile. To come up with a score, the concerns are subtracted from the strengths and are normalized to give each issue area the same weight. KLD rates companies in 7 issue areas: community, corporate governance, diversity, employee relations, environment, product, and human rights. Finally to determine the company's weight in the Index, KLD applies an optimization process using the company's score, market cap, and industry. The optimization process allows for the Index to approximate the same industry weights as the Russell 1000 (upon which it is based), while controlling risk.
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Can I view the company scores on the KLD SSI?
KLD does not publish the scores of the companies on the Index.
How many companies are in the Index?
For most current number of companies on the index, please see the index Fact Sheet.
What universe does the Index utilize?
The Index universe is the Russell 1000 and S&P 500. Only companies from this universe are eligible for the KLD Select Social Index.
What screens does the Index utilize?
Tobacco companies are not eligible for the Index. No uses no other exclusionary screens, but instead modifies a company’s weight to reflect its company score.
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How is the index weighted?
The Select Social Index concentrates weights of holdings in companies with strong social and environmental performance. Companies with high Company Scores have higher weights and companies with low Company Scores have lower weights compared to the Russell 1000.
How is the Index maintained?
The KLD Select Social Index is reconstituted annually and rebalanced quarterly. At each rebalance, the Index weights are adjusted but no additions or removals take place. KLD only removes companies between reconstitutions if a company ceases to trade. The Select Social Index Committee makes the final decision on all changes to the Index.
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Who calculates the SSI performance and values?
The performance and values for the KLD Select Social Index are calculated by Dow Jones Indexes.
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How large is turnover for the Index?
The Index is constrained to have an expected tracking error of less than 2% relative to the Russell 1000. Tracking error measures the deviation of returns from the benchmark.
Are the constituents of the Index "socially responsible" companies?
The KLD Select Social Index is created using an innovative screening methodology that weights holdings based the social and environmental scores assigned by KLD within the constraint of a 2% tracking error relative to the Russell 1000. As a result, the Index is for investors who want more exposure to social and environmental factors than a screened, cap-weighted index affords and who want explicit limits on the risk they take to get this exposure. It is not intended for investors for whom owing certain companies is anathema.
While many SRI funds screen out companies in controversial industries, such as oil production, they cannot support the shareholders and resolutions working to make change. In contrast, the SSI is better able to engage in shareholder advocacy because its constituents represent a broader array of industries and only explicitly excludes tobacco companies. This trade-off is a result of the different SRI strategies embodied in the "screening" vs. "activism" continuum.
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How is the Index different from other social investment indexes?
Unlike conventional social indexes, there are no industry exclusions except for tobacco, and the Index does not utilize strict capitalization weighting since each company's weight is modified to reflect its social and environmental performance. As a result, the Select Social Index is able to engage in shareholder advocacy because its constituents represent a broader array of industries.
How can I obtain a list of the constituents in the Index?
To purchase a current list of constituents, or to subscribe to daily or monthly constituents lists for all KLD Indexes, please contact indexes@kld.com.
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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.
The Select Social Index is licensed to Barclays Global Investors for an exchange-traded fund (ETF), the iShares KLD Select Social Index (ticker: KLD).
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 Indexes can serve as the basis for mutual funds, exchange-traded funds and separately managed accounts. Please contact indexes@kld.com to discuss licensing opportunities.
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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