KLD and Shinko Investment Trust Management Announce the First Environmental Index Fund in Japan

Finding the Best Social Performers:
A look at Some of the Top Companies within the KLD BMS Index

KLD and Shinko Investment Trust Management Announce the First Environmental Index Fund in Japan

By: Chris McKnett, Index Project Manager

         On May 19th, KLD and Shinko Investment Trust Management (Shinko ITM) announced the first environmental index fund in Japan. The Chikyu Ondanka Fund (whose Japanese name translates to "Global Warming Prevention Equity Fund"), managed by Shinko ITM, will be based on the KLD Global Climate 100 Index (GC 100). It is scheduled to launch on June 30, 2006.

         The GC 100 was introduced in July 2005. Its total return performance through the end of May, outpaced the MSCI World Index by more than six percent - - 23.87% vs. 17.49%.

         While much of the recent attention in the alternative energy index space has focused on more narrow clean technology or renewable energy industries, the licensing of the GC 100 signals demand for broader investment in solutions to climate change. Collectively, the constituents of the GC 100 can be allocated across the climate solutions value chain. The proliferation of climate-related investment products demonstrates the nascent investment opportunities associated with climate change and an alternative to the more common characterization of global warming as a risk management issue.

         The imminent launch of the Shinko ITM fund demonstrates an increasing appetite for SRI products both in Japan and in the global marketplace. According to SocialFunds.com, there are now at least 16 SRI funds available to Japanese investors.

         The fund announcement is significant not only because it marked the first environmental index fund in Japan, but also because it represented KLD's first international license. The Chikyu Ondanka Fund resulted from KLD's alliance with Tokyo-based Sunrise Advisors to pursue licensees for investment products derived from the GC 100.

         The new fund is the outgrowth of KLD's global promotion of its research and indexes, from individual company reports to Sudan compliance to the GC 100. As part of this ongoing initiative, KLD will continue to seek global licensees for its family of benchmark and strategy indexes.

         To read the full press release about the fund launch, please click here.

Finding the Best Social Performers: A look at
Some of the Top Companies within the KLD BMS Index

By: Karin Chamberlain, Index Manager

         For its annual reconstitution of the KLD Broad Market Social Index, KLD's Index team works with sector analysts to rank companies on a range of environmental, social and governance (ESG) issues. KLD uses an internal rating system to identify companies on the Russell 3000 with high and low aggregate ESG scores. These scores weigh heavily in the decision to exclude or include companies in the index.

         Interestingly, eight of the 18 companies with the highest scores had a market cap of under $1 billion. Five of the top 17 companies had a market cap under $500 million, including Green Mountain Coffee Roasters and Wild Oats Markets.

         While many of the companies on the Russell 3000 that score the highest are familiar names like Timberland, there are some surprises among the more socially progressive companies, including two utilities and an energy company.

         Both utility companies, WGL Holdings and Northwest Natural Gas Company, scored well with strong diversity records and an energy mix comprised almost entirely of natural gas rather than coal or oil. Both companies are also involved in alternative energy projects such as wind and solar power. In addition, Northwest Natural Gas Company scored high on employee relations, with strengths for union relations, cash profit sharing, and progressive programs to involve and educate employees in the management of the company.

         Ormat Technologies, the only energy company within the top 50 companies, derived virtually all of its revenue from the production and distribution of renewable or co-generated energy. The company also scored strong for diversity, with a female CEO and progressive diversity policies.

         Energy Conversion Devices, the only chemical company within the top 100 companies by score, develops alternative energy technologies. Environmentally beneficial products include cadmium- and lead-free batteries for cars, hydrogen technology for enhancing fuel cells, and cadmium-free technology for solar power cells. Energy Conversion Devices demonstrates notable leadership in diversity, including the presence of co-founder Dr. Iris Ovshinsky and other women on the board of directors and senior line positions. In addition, the company maintains a progressive compensation structure, including notably low CEO compensation and stock options for full-time employees.

         Financial services companies made up four of the top 18 companies, three of which were banks. These banks scored very strongly on diversity, for example Cathay General Bancorp and Hanmi Financial Corporation, earned strengths for diversity within both the senior line executives and the board of directors. These banks, which serve immigrant and minority communities, also scored well for community issues, including strengths for partnerships with public/private organizations that support housing initiatives for the economically disadvantaged.

         In addition to these companies, all of which are current members of the Russell 3000, KLD's Index team has been working closely with the Research team to evaluate new companies that are slated for addition to the Russell 3000. The BMS Index reconstitution process will be complete June 30th, at which time KLD will make new company profiles for these companies available in SOCRATES.