New Zealand's Exchange and S&P Dow Jones Indices have launched the S&P/NZX 50 Portfolio ESG Tilted Index, the latest addition to their family of indices. Jaspreet Duhra, global head of ESG indices at S&P DJI, says the innovative index aims to support the growing interest in sustainability factors from investors in the New Zealand market.
“With the heightened focus on the impact of companies’ environmental, social and governance (ESG) footprints, this index serves as an independent and transparent tool in measuring ESG performance as more investors incorporate sustainability targets in their investment decisions,” Duhra adds.
The S&P/NZX 50 Portfolio ESG Tilted Index is based on the S&P/NZX 50 Portfolio Index but offers enhanced ESG characteristics. It over-weights and under-weights companies based on their respective S&P DJI ESG Score.
The index uses the universe of stocks from the S&P/NZX 50 Portfolio Index, which is comprised of the same constituents as New Zealand’s headline equity index, the S&P/NZX 50 Index, but with a 5% cap on the float-adjusted market capitalization. The tilted approach is designed to provide exposure to a diversified portfolio across various sectors while targeting high ESG-performing companies.
In addition to the S&P DJI ESG Scores, the index follows eligibility criteria based on the companies’ business activities and their alignment with the UN Global Compact Principles. Companies that produce controversial weapons, thermal coal, and tobacco are excluded. In response to regulation and demand in the New Zealand market, the index also excludes companies within the energy sector as well as those that operate in certain GICS sub-industries such as casinos and gaming.
NZX chief executive Mark Peterson, says: “There is a real interest and growing focus on ESG, and this index now provides a performance benchmark for the development of product that the market is demanding. Investors will have more choice and, importantly, another lens on the New Zealand market, that allows them to retain diversification while giving more weight to high-ESG performance companies.”
“We also see this as further rewarding and encouraging the focus on disclosing and discussing companies’ approaches to sustainability and how they are managing ESG risks and opportunities. The performance of companies who advance will be reflected in improved weightings in the index,” Peterson adds.