S&P Dow Jones Sustainability Indices  

S&P Dow Jones Sustainability Indices  

On January 9th, the S&P Dow Jones Indices (S&P DJI) announced the launch of two new sustainability-focused indices: the S&P 500 SDG Index and the S&P Global LargeMidCap SDG Index. The purpose of these indices is to measure the performance of stocks in the S&P 500 and S&P Global LargeMidCap that align with the UN Sustainable Development Goals (SDGs). Created in 2015, the UN SDGs are a collection of 17 goals aimed at addressing some of the largest global challenges, including clean energy, climate action, responsible consumption & production, and industry & innovation.  

According to the 2023 UN Sustainable Development Report, all 17 SDGs are seriously off track, as progress toward achieving most of the goals stalled with the pandemic and has remained stagnant since. Sustainability is often viewed solely through the lens of environmental considerations, but the UN characterizes the SDGs as fundamentally an investment framework. The goals strive to encourage investment in sectors that will bolster sustainable development. 

Below, we take a closer look at these new additions to the S&P DJI and examine how sustainability is increasingly becoming an integral part of investing.  

S&P DJ Sustainability Indices  

The new sustainability indices include stocks from the S&P 500 and S&P Global LargeMidCap that align with at least one of the UN SDGs. Supported by UK-based data provider Impact Cubed, the new indices will primarily focus on product manufacturing and distribution, along with community and stakeholder engagement. It is important to note that these indices are not a measurement of financial materiality; instead, they emphasize the social and environmental impacts of the companies. Here is a closer individual look at each index:  

S&P 500 SDG Index 

The new S&P 500 SDG Index is based on the S&P 500, which tracks the performance of the largest 500 companies in the US. Currently, 330 out of 500 companies are represented in the S&P 500 SDG Index, with the largest portion from the technology industry (35.6%) and the healthcare industry (16.1%). In 2023, the return on the S&P 500 SDG Index was 26.4%; in comparison, the return on the S&P 500 Index was 20.42%.  

S&P Global LargeMidCap SDG Index  

The S&P Global LargeMidCap Index represents the top 85% of market capitalization in both developed and emerging countries. Currently, the S&P Global LargeMidCap SDG Index includes 1,247 entities, with the technology industry once again accounting for the highest proportion (27.8%), followed by the financial industry (20.8%). The countries most represented in the Index are the United States (313), Japan (174), and China (92). In comparison to the standard S&P Global LargeMidCap Index which had a return of 15.04% in 2023, the S&P Global LargeMidCap SDG Index had a return of 19.45%.  

Purpose of the New Sustainability Indices  

These two indices provide a way for investors to financially support companies contributing to the UN SDGs for a more sustainable economy. The UN goals touch on all three areas of sustainability: environment, economy, and society, making these new indices a valuable tool for generating a well-rounded investment portfolio. While these indices do not measure financial materiality, the focus on environmental and societal impacts will highlight transparency efforts throughout the entire value chain and lifecycle of a product. The indices aim to reduce the carbon footprint of the industry leading companies represented in the S&P 500 and S&P Global LargeMidCap. As the demand for sustainability and transparency grows, the S&P sustainability indices offer a new tool to investors and market participants to align their investments with the UN sustainability goals.   

These indices encourage the growth of sustainable investment, as they exist at the intersection between environmental and financial development. Furthermore, these indices will also be an important way to track how the demand for sustainability efforts affects investment trends.  

Moving Forward  

As these new indices reflect a growing push toward transparency in value chain operations, particularly concerning environmental and societal impacts, Capaccio’s services can help your company meet present expectations and take proactive steps toward future developments. One way that Capaccio can make a difference in your company is with the EHS-Dashboard™ – a highly customizable, cloud-based software that tracks metrics and targets specific to your company. With the EHS-Dashboard™, your company will be equipped with a comprehensive view of the entire value chain, enabling you to identify and mitigate potential risks, as well as identify opportunities to increase efficiency. The data from the EHS-Dashboard™ is incredibly useful for communicating the strengths of your company to current stakeholders and potential investors. To find out more about the EHS-Dashboard™schedule a demo today.