September 11, 2003
Dow Jones Sustainability Indexes Add Toyota, HP, Eject DaimlerChrysler, Bank of America
by William Baue
After its annual review, DJSI adds companies it deems as having strong sustainability performance
to its index universe, and deletes companies that lag in sustainability practice.
Last week, the Dow Jones
Sustainability Indexes (DJSI) announced the results of its yearly review, where it
reconstitutes its indexes by adding new companies and deleting others that it sees as not having
kept pace with sustainability best-practice. The DJSI World Index added more than 50 new
constituents, including Toyota (ticker: TM), which jumped into the leader
position for the automobile sector, and Hewlett-Packard (HPQ). More than 40 companies,
including DaimlerChrysler (DCX) and Bank of America (BAC), were deleted
from the DJSI World Index, which covers the top 10 percent of largest 2,500 companies in the Dow
Jones World Index.
"The annual review ensures that [DJSI-based indexes] are based
on an accurate and up-to-date reflection of best-practice in corporate sustainability," said Alex
Barkawi, managing director of Sustainable Asset
Management (SAM). SAM, headquartered in Switzerland, helps administer the DJSI.
More than 40 asset managers, which manage over 2.2 billion EUR, license DJSI information. The
managers include US-based State Street Global
Advisors, Switzerland-based Credit Suisse Asset Management, and
assessment also gives companies an incentive for constant improvements to best-in-class
sustainability performance," Mr. Barkawi added.
Toyota earned the leading position on the
DJSI World Index in the automobile industry due to strong eco-efficiency performance, a proactive
greenhouse gas (GHG) mitigation strategy, and high corporate average fuel economy. The Japanese
car manufacturer also exhibited best practice in managing lower-carbon technologies, such as hybrid
and fuel-cell technology, and maintains a strong life-cycle management of its products.
"While VW scored significantly higher in the social dimension (standards for suppliers, human
rights issues in the value chain) than Toyota, Toyota seems to execute more systematically on its
strategies regarding environmental issues, including recycling, efficiency and technology,"
according to DJSI analysts.
VW leads the auto sector on the
DJSI Stoxx Index, which covers the top 20 percent of companies in the Dow Jones STOXX 600 Index in
The increasing competition in sustainability performance pushed
DaimlerChrysler out of the DJSI World Index.
"Poorer fuel economy, the lack of a
systematic CO2 strategy, and comparatively lower improvement in the eco-efficiency of operations
put pressure on DaimlerChrysler's sustainability score in the environmental dimension," said DJSI
analysts. "Moreover, financial robustness impacted on the economic dimension."
America's lack of competitive performance in sustainability also resulted in expulsion from the
DJSI World Index.
"Bank of America's corporate sustainability strategy is stalling: no
progress is visible in corporate governance, in environmental policy/management systems, and
financial products," DJSI analysts stated to SocialFunds.com.
HP reappears on the DJSI
World Index, after last year's hiatus due to concerns over its merger with Compaq.
year however, the company has improved its sustainability performance by taking a number of steps
to take advantage of the merger," in DJSI analysts' opinion. "Although HP is not as strong as the
Japanese companies in the environmental performance, the company is very strong in all social
criteria as well as in most economic, as for example customer relationship management, brand
management, corporate governance, and code of conducts."
The review also found that the
DJSI World Index outperformed the mainstream market financially since the last review in September
2002. Over this past year, the DJSI World increased by 23.1 percent (in US dollars) while the DJ
World Index went up by 22.7 percent and the MSCI World rose by 21.2 percent. Such outperformance
bolsters the business case for considering sustainability in investment decisions.
we launched the DJSI family in 1999, there has been a significant shift in market perception of
sustainability investments," said John Prestbo, editor of the Dow Jones Indexes. "A growing number
of private and institutional investors are adapting economic, environmental and social criteria to
reflect the impact of sustainability issues on long-term shareholder value."