31 Oct 14

An introduction to the Dow Jones Sustainability Index (DJSI)

structureThe Dow Jones Sustainability Index (DJSI) is a family of indices that have a strong focus on stock performance and serve as a key benchmark of investors who consider sustainability as part of their portfolio risk assessments.

The DJSI World Index is the 2500 largest companies based on free-float market capital in the S&P Global Broad Market Index. Of these invited companies, RobecoSAM and S&P Dow Jones Indices jointly track stock performance in terms of economic, environmental and social criteria to assess performance for investors. Example criteria that organisations are assessed on include Climate Strategy, Stakeholder Engagement, Product Stewardship, Financial Stability and Systemic Risk.

Similar to CDP, the DJSI has a set annual timeline for reporting. The DJSI is made up of a number of regional indexes (World, Europe, North America, Asia Pacific, Korea, Australia and Emerging Markets) but in all instances companies are included based on the long-term economic, social and environmental sustainability of their asset management plans. The World Index includes industry-specific sustainability criteria for the 59 sectors identified by the Global Industry Classification System (GICS) to give investors increased comparability and general criteria for all reporting organisations covering economic, social and environmental aspects.

Eligible companies are scored and ranked against peers to determine the top 10% of performers which are reported in the DJSI. The DJSI is compiled with a combination of annual organisation submitted questionnaires and interviews as well as ongoing Media and Stakeholder Analysis (MSA). MSA cases are set up if a harmful allegation arises (such as a litigation or fine) to assess how an organisation reacts to the negative impact. If an impact is deemed critical, an organisation can be removed from the DJSI. A recent example of this is the removal of BP from the DJSI following the 2010 Deepwater Horizon disaster.

Overview of the Media and Stakeholder Analysis (MSA) Process

media_and_stakeholders_analysis

For large organisations, assessment under the DJSI is obligatory rather than a voluntary scheme. It is an important framework for maintaining reputational value and communicating with the investor community on performance in sustainability. It is important for organisations to engage with the DJSI to ensure that the assessment information they hold is accurate, transparent and relevant and that any MSA cases are resolved. 

Find out more about the main CSR reporting frameworks here:

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