What are the Dow Jones Sustainability Indices?
Launched in 1999, The DJSIs are a group of best-in-class benchmarks designed for investors who are dedicated to instilling sustainability best practises in the stocks they buy. Businesses are assessed on their long-term environmental, social and economic sustainability performance. If they want to be ranked in the indices, then sustainability needs to be at the core of everything that they do.
There’s one main index, DJSI World, which covers businesses all over the world, and alternate geographic indices which cover the Europe, North America, Asia Pacific, Korea, Australia, Chile and the MILA Pacific Alliance regions, with a final fringe index named Emerging Markets.
The DJSI tracks the top 10% of high performing, sustainability-driven companies, and is consistently updated in order to encourage businesses to strive to be featured.
Who made the Dow Jones Sustainability Indices?
The DJSI is a joint strategic partnership between S&P Dow Jones Indices and SAM (Sustainable Asset Management). Since its creation in 1999, the DJSI has become the most important reference point for sustainability investors and companies across the world.
Why are the DJSIs important for your business?
Research done at HEC Paris aimed to determine just how important the DJSI is to investors. Their results show a ‘positive impact on visibility among analysts and percentage of shares held by long-term investors’, but a ‘limited impact on stock price and trading volume’. In general, the research found that the costs of sustainability practices can bring worthwhile returns in a company’s visibility to key stakeholders.
The bottom line: improving your sustainability practices are good for the planet and, in the long-term, great for your wallet – what’s not to love? Companies that rank well in the DJSI are more likely to find themselves with long-term stakeholders, and will be more visible by virtue of the exposure granted by the indices.
How to be incorporated into the DJSI
Unfortunately, there’s no fast-track option to get your company ranking in the DJSI. Businesses that are accepted are chosen from the ‘DJSI family starting universe’, which is comprised of the S&P Global BMI (which is roughly 10,000 companies worldwide). Out of these companies, approximately 4,500 are invited to participate the Corporate Sustainability Assessment (CSA), which is an assessment that judges a company’s sustainability practises, before benchmarking and ranking them.
Once your company has been assessed, if you’re deemed in the top 10% of sustainable market caps, then you’re in – hooray! This is, obviously, not an easy feat, but it’s an honourable goal for any business to strive for.
How to improve business sustainability
While getting ranked on the DJSI might be a little off in the distance for now, every journey starts with a single step. Laying the foundations for sustainability is crucial for any business’ success, no matter if you’re striving to top the DJSI, or building your own SME from the ground up.