Global Sustainability
Signatories Index
7.5% VC ER

Introduction

The Global Sustainability Signatories Index 7.5% VC ER (GSSI) provides exposure to up to 100 Global Compact signatories who outperform their peers in terms of their environmental, social and governance performance. It stems from the belief that sustainable companies can yield good risk-adjusted returns. Tobacco and energy companies are excluded along with companies embroiled in serious controversies.

How do we define sustainability?

Sustainalytics measures the sustainability performance of companies by assessing how well they manage environmental, social and governance factors. The factors that are assessed are based on the sector in which the company operates. For example, data privacy is an important factor for media companies, while CO2 is more relevant for oil and gas companies.

Environment

Environmental issues include a company’s policies and programs to manage natural resources and prevent or minimize pollution and emissions. Managing these issues well can reduce regulatory and reputational risks.

Social

Our social indicators look at the way the company treats people across its value chain – from its suppliers to its employees, customers and the communities where it operates. Managing these relationships well is crucial for the company’s reputation, brand and licence to operate.

Governance

When we assess a company’s corporate governance structures we look at the checks and balances put in place to safeguard shareholder and stakeholder rights. Some of the issues we look at include executive compensation, board accountability and business ethics (bribery and corruption).

* A controversy that will have a significant to very significant impact on society and the environment or which poses a material risk to the company
† See Eligibility & Selection

Composition

(As of 30 September 2018)

Regional Weight in Percentages

Sector Weight in Percentages

Top 10 Constituents

1 Intel Corporation Technology
2 Cisco Systems Technology
3 Kimberly-Clark Corporation Consumer non-durables
4 HP Inc. Technology
5 Hewlett Packard Enterprise Company Technology
6 International Flavors & Fragrances Consumer non-durables
7 Tokyo Electron Technology
8 Daikin Industries Industrials
9 Westpac Banking Corporation Finance
10 Nestlé S.A. Consumer non-durables

Eligibility and Selection

Index Calculation

The Index is calculated in USD and represents returns net of dividend tax.

Eligibility Criteria

To be eligible, companies must be:

  • In Sustainalytics’s research universe (>11,000 listed companies)
  • A Global Compact signatory
  • Compliant with the Global Compact’s 10 Principles on human rights, labor the environment and anti-corruption
  • Not involved in the manufacturing or distribution of tobacco
  • Not involved in the energy sector
  • Not involved in a level 4 or 5 controversy. Sustainalytics rates controversies on a hurricane scale from 1 to 5 with 5 being the most egregious controversies

Financial Criteria

New additions require a positive EBIT for the past three years. Current constituents are removed if they’ve had a negative EBIT for two consecutive years.

Liquidity Criteria

The free-float market cap must be larger than $500mn and the average daily trading over the past three months above $10mn for he past 120 days.

Volatility Control Overlay

The Index is calculated as an excess return over 3-month USD Libor rate, designed to achieve a 7.5% level of volatility. This is done by dynamically allocating to the equity index and Libor USD Overnight Rate depending on the realized volatility in the equity index.

Selection Criteria

The bottom 75% of companies in each sector are removed from consideration. From the remaining top quartile companies, the companies with the highest ESG rating are selected so the sector weights for each region in the index matches the global benchmark.

Rebalancing and Index Calculation

The index is rebalanced once a year to select new sustainability constituents. The selected stocks are weighed based on their market capitalization with the following restrictions: The weight of each stock is capped at 10% and it should not exceed 10% of the average daily trading volume. The constituents are re-weighted each quarter to match the weights of the last rebalancing and the index value is calculated in USD by Solactive.

Disclaimer

Copyright ©2018 Sustainalytics. All rights reserved

Sustainalytics controls the rights to and is the owner of The Global Sustainability Leaders Index (the “Index”) and retains all proprietary rights therein. Sustainalytics and all of their respective affiliates and suppliers have not participated in the creation or development of this investment product and the United Nations, the Foundation for the Global Compact or any of their respective affiliates do not endorse this or any other investment product.

Sustainalytics does not sponsor, endorse or otherwise promote any security, other financial product or transaction (each a “Product”) referencing the Global Sustainability Leaders Index. Sustainalytics makes no representation or warranty, express or implied, to the owners of any Product or any member of the public regarding the advisability of investing in securities or financial products generally or in the Product particularly or the ability of the Index to track the investment opportunities in the commodity futures market or otherwise achieve their objective. Sustainalytics has no obligation to take the needs of the owners of any Product or any other person into consideration in determining, composing or calculating the Index. Sustainalytics is not responsible for, has not participated and will not participate in the determination of the timing of, prices of, or quantities of any Product to be issued or in the determination or calculation of the equation by which the Product is to be converted into cash. Sustainalytics has no obligation or liability in connection with the administration, marketing or trading of any Product.

THE INDEX IS DERIVED FROM SOURCES THAT ARE CONSIDERED RELIABLE, BUT SUSTAINALYTICS, ALL OF THEIR RESPECTIVE AFFILIATES AND SUPPLIERS DO NOT GUARANTEE THE VERACITY, CURRENCY, COMPLETENESS OR ACCURACY OF THE INDEX OR OTHER INFORMATION FURNISHED IN CONNECTION WITH THE INDEX. NO REPRESENTATION, WARRANTY OR CONDITION, EXPRESS OR IMPLIED, STATUTORY OR OTHERWISE, AS TO CONDITION, SATISFACTORY QUALITY, PERFORMANCE, OR FITNESS FOR PURPOSE ARE GIVEN OR DUTY OR LIABILITY ASSUMED BY SUSTAINALYTICS, ALL OF THEIR RESPECTIVE AFFILIATES AND SUPPLIERS, IN RESPECT OF THE INDEX OR ANY DATA INCLUDED THEREIN, OMISSIONS THEREFROM OR THE USE OF THE INDEX IN CONNECTION WITH ANY PRODUCT, AND ALL THOSE REPRESENTATIONS, WARRANTIES AND CONDITIONS ARE EXCLUDED SAVE TO THE EXTENT THAT SUCH EXCLUSION IS PROHIBITED BY LAW.

To the fullest extent permitted by law, Sustainalytics shall have no liability or responsibility to any person or entity for any loss, damages, costs, charges, expenses or other liabilities, including without limitation liability for any special, punitive, indirect or consequential damages (including, without limitation, lost profits, lost time and goodwill), even if notified of the possibility of such damages, whether arising in tort, contract, strict liability or otherwise, in connection with the use of the Index or in connection with any Product.

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