October 02, 2003
European Smallcap SRI Index Launches
by William Baue
Kempen Capital Management and SNS Asset Management fill a market gap with what they call the first
SRI index in the world to focus on small capitalization companies.
In Europe, socially responsible investment (SRI) indexes, such as the Dow Jones Sustainability Indexes, FTSE4Go
od, and the Ethibel
Sustainability Indexes, abound. However, these indexes for the most part cover large
capitalization companies, leaving European companies with smaller capitalization largely uncovered
by indexes. Earlier this week, however, UK-based Kempen Capital Management and Netherlands-based
SNS Asset Management launched the
Kempen/SNS Smaller Europe SRI Index, which they believe to be the first small-cap SRI index in the
"[U]ntil now, it has only been large-caps that have been rated for
sustainability," said Neil Dunn, managing director at Kempen, which manages 1 billion euros in
European smallcaps. "There is tremendous interest in the subject of SRI and small companies are
very keen to demonstrate that they are responsibly managed."
HSBC Bank's Quantitative Techniques Division will calculate and
maintain the Kempen/SNS Smaller Europe SRI Index, which is constituted from the HSBC Smaller
European Companies Index. This index includes about half of the 2,800 companies that constitute
the overall universe of European smallcaps.
In 2001, Kempen and SNS began investigating
some 1,700 smaller companies, screening them according to SNS's sustainability criteria that
consider environmental and social performance as well as business ethics. Since then, Kempen and
SNS have assessed 419 corporations, with 189 companies passing this initial screening. At
launch-time, the index includes 69 companies from 12 countries, though Kempen and SNS intend to
more than double this constituency to 150 companies by mid-2004.
Among the first to
announce their inclusion in the index were two Finland-based companies: Metso Corporation, which
has paper, mineral, and automation divisions, and Elcoteq Network Corporation, an electronics
"We are working hard to be a responsible citizen in the communities in
which we operate and we are happy that our engagement endeavors have been recognized," said Sari
Sarin, Elcoteq's senior manager of environmental affairs.
Kempen and SNS will not only
apply the sustainability criteria, but also will engage with companies to promote social and
environmental best practice.
"Many companies want to improve their sustainability
performance but require guidance in developing their own policy," said Mr. Dunn. "Part of our role
will be to work with companies to identify the areas that they need to improve in, with a view to
them being included in the Kempen/SNS Smaller Europe SRI Index."
Kempen and SNS are no
strangers to collaboration. They jointly manage the Orange SeNSe Fund, a portfolio filled with
small- and mid-cap European companies that adhere to sustainability criteria. SNS, which has
about 9 billion Euros under management for institutional investors, also manages the oldest SRI
fund in the Netherlands.
"We have more than 30 years experience in ethical investment
and more than ten years in sustainable development, so when we were approached by Kempen Capital
Management, we jumped at the chance to get involved in a project that was going to be a first, and
also make a difference," said Guus van der Kamp, SNS's managing director. "We are strongly of the
belief that companies with a positive sustainable attitude will be the greater generators of value
added in the longer term."