September 03, 2004
Dow Jones Sustainability Indexes Add General Electric and Drop Electrolux
by Doug Wheat
The annual change in the DJSI is based on recent assessment of corporate economic, environmental
and social performance.
Yesterday, the Dow Jones Sustainability Indexes (DJSI) announced the results of its
once-a-year review of corporate sustainability best-practice. As a result, the DJSI World Index
will add 38 new constituents, including General Electric (ticker: GE), Staples (SPLS), and Herman Miller (MLHR). More than 32
companies, including Electrolux (ELUX), Texas Instruments (TXN), and Amgen (AMGN), were deleted
from the DJSI World Index, which covers the top 10 percent of largest 2,500 companies in the Dow
Jones World Index.
"Since the DJSI inception in 1999, SAM has been gradually
increasing the weighting placed on actual performance of sustainability measures and decreasing the
weighting of policies and management systems," according to Alex Barkawi, Managing Director of SAM
Indexes. "This trend continued in the most recent assessment for the annual review," Mr. Barkawi
added. SAM Indexes, headquartered in Switzerland, is the operating company for the DJSI and is a
cooperation of Dow Jones Indexes, STOXX Limited and SAM Group.
The DJSI component changes
will be effective with the opening of equity markets on September 20th.
More than 40 asset
managers, which manage nearly $3.6 billion, license DJSI information. The managers are primarily
based in Europe, including the Merrill Lynch division in the UK, but managers in Asia and North
America also license DJSI data.
"A rising number of private and institutional investors
as well as asset managers have moved into the field and have rapidly increased professionalism in
this market segment," said John Prestbo, Editor Dow Jones Indexes.
The DJSI World Index
has a 16.1% one-year return and a 7.3% three-year annualized return through August 31, 2004. In
comparison, the Morgan Stanley Capital Index (MSCI) has a 15.6% one-year return and a 6.2%
three-year annualized return. According to Mr. Barkawi, the DJSI World Index primarily consists of
large capitalization stocks and thus its recent financial performance trails the broader Dow Jones
World Index. Small- and medium-capitalization stocks as a class have outperformed
large-capitalization stocks over the last several years.
About 35 percent of the market
capitalization of the new DJSI World Index is in US-based companies versus more than 50 percent in
Dow Jones World Index.
Selection for the DJSI is a point of pride for many companies that
want to be at the forefront of corporate sustainability.
"We are seeing a growing number
of firms integrating DJSI membership into their sustainability objectives," said Mr. Barkawi.
Out of the more than 300 companies in the DJSI World Index, 74 companies have been part of the
index since its inception in 1999. These companies include 3M (MMM), Adidas (ADSN.DE), Barclays (BARC.L), Canon (CAJ), Novozymes,
Procter & Gamble (PG), Tokyo Gas, and Westpac.
A notable addition to the DJSI World Index this year is General Electric Co. GE is perennial
concern for social investors due to their nuclear power business and their pollution remediation
efforts regarding the Hudson River.
"GE entrance into the DJSI was based on a number of
sustainability strengths of the company. Examples include GE’s position with regard to lower-carbon
power generation technologies such as gas turbines, as well as its activities in the wind and solar
sector, "according to Mr. Barkawi. "GE also benefited from a strong position in human capital
development, talent attraction and retention, as well as strategic planning," he continued.
"The Index recognizes GE's commitment to being a 'good' as well as a 'great' company," said
Jeff Immelt, GE's Chairman and CEO.
A notable deletion from the DJSI is Electrolux, the
Swedish appliance maker. Electrolux has generally been considered a leader in corporate
sustainability for many years.
Mr. Barkawi noted that there is no particular factor that
led to the deletion Electrolux but that the furnishings and appliance sector is very competitive in
terms of sustainability and that Herman Miller edged them out.
As part of the review, DJSI
leaders are named in each of 18 market sectors. In 4 of the sectors there was a change in
leadership. Statoil (Sri0213), of Norway, replaced BP
(BP), at the top
of the energy sector. Toyota (TM), Intel (INTC), Unilever(UN), Novozymes, and Procter &
Gamble maintained leading positions.