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BOSTON, MA - May 4,
2005 - The landmark Domini 400 SocialSM
Index turns 15 this month. The Index, developed by Boston-based
KLD Research & Analytics, Inc., is the world's first to
benchmark the performance of equity portfolios subject
to multiple social screens. In its 15 years, the Domini
400 Social Index has marked the growth of social investing
from a tiny niche to what the Social Investment Forum
estimates is a $2 trillion market.
"With each year
the Domini 400 Index tells us more about the performance
of socially screened portfolios. It has shaped how investors
and companies look at social and environmental standards
for companies," said Peter D. Kinder, KLD's president
and co-founder. "We expect that the Domini 400 Index
has more to teach us about portfolio performance. We know
it will continue to play an important role in the dialogue
between investors and the companies they own."
The Domini Index
The Domini 400 Social Index is the generally accepted
benchmark for the market of publicly traded equities socially
responsible investors will buy. It is made up of 400 US
companies that pass multiple, broad-based social and environmental
screens. The Domini 400 Index:
- Is a standard for
measuring the financial performance and risk characteristics
of socially screened portfolios;
- Defines the screens
social investors typically apply; and
- Provides investors
with a large universe of companies that passed those
screens.
Portfolio
Performance
"At the start, we
wanted to know, 'How does the application of social criteria
affect investment performance?"' Kinder explained.
"In 1988 when work on the Index began, socially responsible
investing (SRI) existed in a climate of skepticism. Many
argued - without any data - that SRI came at such a high
cost in terms of portfolio performance that it made no
sense. These critics argued trustees who applied social
screens would violate their fiduciary duties."
Thomas Kuh, Managing
Director of KLD's Indexes said, "KLD's Domini 400
has, over its life, outperformed the S&P 500. But like
any portfolio, it has been up and down when compared with
unscreened benchmarks. The Domini 400's great accomplishment
has been to provide solid data on the financial performance
of socially screened portfolios. Investors, trustees and
academics can now make their judgments based on real numbers.
Our challenge now is to respond to the new questions about
risk and return institutional investors are asking."
Here are the Domini
400's performance numbers through April 30, 2005:
Total
Return Tables
- As of April 30, 2005
KLD's Domini 400 SocialSM
Index
| |
Month |
1st
Q 2005 |
YTD |
One
Year |
Three
Year* |
Five
Year* |
Ten
Year* |
Since
5/1/90
Inception |
| KLD's
DS 400 Index |
-1.87%
|
-4.60%
|
-6.39%
|
2.79%
|
3.51%
|
-4.08%
|
10.83%
|
438.79%
|
| S&P
500 |
-1.90%
|
-2.15%
|
-4.00%
|
6.34%
|
4.24%
|
-2.95%
|
10.28%
|
381.89%
|
|
Source:
Dow Jones & Co. and Standard & Poor's
*Annualized Returns
Defining Screens
& Screening
To construct a social index, KLD had to first determine
what screens were applied in the market it wished to gauge.
The topics of concern to social investors have remained
fairly stable. However, the actual social screens they
apply are dynamic; they change with events and new information.
The bottom line is
consistency: investors want to put their money in companies
that do not fail their standards - and generate a decent
rate of return. At the same time, institutional investors
have begun looking to sustainability criteria for insights
into a company's financial performance. "KLD is looking
at new ways to analyze performance data - both financial
and social - to establish correlations and causation.
We are working on metrics to help integrate social and
environmental factors into investment decisions,"
said Kuh.
An Investable
Universe
"Most investors, social or not, now demand that
the companies they invest in will practice good governance,
and many now expect good corporate citizenship. An ever
increasing group of investors make the effort to incorporate
social concerns into their investment decision-making,"
added Kinder.
In 1990, an investor
who wanted to apply more than one simple screen - tobacco,
South Africa, gambling - had a difficult time applying
the screens and producing a "buy" list. Where
it was possible at all, the resulting lists held few companies.
This proved a major barrier for individual and institutional
investors.
With the launch of
KLD's Domini 400 Social Index, investors had a significant
screened universe with which to work. Because of variations
in screening choices and tolerances, one group of choices
did not fit all. But just having a list from which to
start marked a huge advance.
"We focused
on the large cap stocks because those are the ones most
investors buy. But we wanted to add smaller companies
that had strong social stories," Kinder said. "As
companies merge, we continually have to find replacements.
The job never ends."
As the many academic
studies using Domini 400 data testify, the use of the
Indexes as a buy list has proven very valuable in establishing
social investing's credibility as a discipline.
Impact of the Domini 400
The impact of KLD's Domini 400 Social Index literally
changed the rules on how companies define corporate social
responsibility, and it provided a means for socially responsible
investors to identify companies that matched their expectations.
Today, KLD's Domini 400 Social Index is the benchmark
for more than $1.8 billion under management by one social
investment firm alone. It also set the stage for a family
of KLD Indexes that include: KLD Select SocialSM
Index; KLD Large Cap SocialSM
Index; KLD Broad Market SocialSM
Index, KLD NASDAQ Social Index;
and the KLD Catholic Values 400SM
Index. In February 2005,
Barclay's Global Investors introduced the first North
American socially responsible Exchange Traded Fund based
on the KLD Select Social Index. Today more than $8 billion
is invested in funds based on KLD Indexes.
"I'm very proud of what KLD
has accomplished with the Domini 400," says Kinder.
"Its performance allows investors to make the case
for social investing. Its screens have largely defined
how corporate social performance is gauged by the public."
Still, there are big challenges
ahead for the Index and KLD. "The financial services
industry has become much more sophisticated in its analysis
of risk and return than it was in the late 1980s,"
said Kuh. "Our team is committed to ensuring the
Domini 400 will contribute as much in the coming 15 years
as it has in the past 15."
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KLD Research & Analytics, Inc.
is an independent investment research and index company.
Its products and services enable institutional money managers
and investors to integrate social and environmental factors
into their investment strategies. KLD helps money managers
gather assets, manage risk and control costs.
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