GC 100 Index - Frequently Asked Questions

Below is a list frequently asked questions regarding the GC 100 index. If your question is not answered here or you would like additional information, please contact Melissa Chase, Marketing Specialist.

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Who is calculating the index and index performance?

Sustainalytics is calculating the index (using free-float market capitalization weights) and index performance and will be providing total returns on a monthly basis.

Is the index investable?

At the present time, the index is not investable and total return performance will only be provided on a monthly basis. The main purpose of the index is to investigate the relationship between commitment to implementing the Global Compact principles and stock performance.

Is the GC 100 a real-time index?

No, the GC 100 total return is not calculated in real time and will be reported on monthly basis.

What companies are eligible for the index?

Companies are eligible for the index if they or their parent company have been Global Compact signatories for a minimum of one year, they are publicly listed, and they fall within the research universe of Sustainalytics, who provided the research for the index. As well, they must pass a minimum financial screen that requires positive EBIT on average for the three years preceding the index annual review. In the case that a company is already a constituent of the index, it will only be removed if there are two consecutive years of negative three-year average EBIT figures.

How often will the index constituents change?

The constituents of the index are reviewed on an annual basis in September. Changes in the index will reflect changes in the universe of publicly listed Global Compact signatories, market developments and company developments.

What is the expected index turnover at the annual review?

At the present time we have not put a limit on turnover, which will depend on future changes in the number of Global Compact signatories, market developments and company developments. While the main purpose in creating the index was to investigate the relationship between commitment to corporate sustainability practices and stock performance, the cost of turnover to investors will be kept in mind when making changes during the annual review. 

Can you please explain the purpose of the financial screen?

The purpose of the financial screen was to eliminate the small part of the universe that was not generating positive earnings (EBIT) in the three years leading up to the index selection. Less than half of one per cent of companies became ineligible for inclusion based on this criteria.

What is the constituent selection process?

Constituents are chosen for the index with the dual goal of having a sector representation (free-float market capitalization weights) within a range of the key, well-known global indexes; and to choose companies that have strong practices and performance in adhering to the principles of the UN Global Compact around management of human rights, labour rights, the environment and anti-corruption. Among the indicators used in the selection of the constituents were the company’s level of reporting in relations to the Global Compact’s required annual Communication on Progress and whether or not the company’s chief executive submitted its annual letter of support for the UN Global Compact and its principles.

How was the backtesting process conducted?

The index was constructed for all three years starting with the selection of the 2010 constituents using the pre-established methodology and the information available at the time (universe of signatories, EBIT for the preceding three years and policies and practices for companies that Sustainalytics covered in September 2010, September 2011 and September 2012). The performance for the Index was then calculated over the three-year period with the constituent changes taking place on the 10th of September in 2011 and 2012.

About the UN Global Compact

Launched in 2000, the United Nations Global Compact is both a policy platform and a practical framework for companies that are committed to sustainability and responsible business practices. As a multi-stakeholder leadership initiative, it seeks to align business operations and strategies with ten universally accepted principles in the areas of human rights, labour, environment and anti-corruption, and to catalyze actions in support of broader UN goals. With 8,000 corporate signatories in 145 countries, it is the world’s largest voluntary corporate sustainability initiative. www.unglobalcompact.org

About Sustainalytics

Sustainalytics is an award-winning, independent provider of environmental, social and governance (ESG) research and analysis, and responsible investment services. With more than 20 years of experience, Sustainalytics offers a variety of solutions to investors implementing socially responsible and responsible investment strategies. The firm has more than 120 staff members, including more than 70 analysts with a variety of multidisciplinary and industry expertise. In 2012, Sustainalytics was voted Best RI Analysis firm by Thomson Reuters Extel Awards. www.sustainalytics.com