August 24, 2009
KLD's Sustainability Indexes Are Rebranded as a Result of Partnership with FTSE
by Robert Kropp
Rebranded indexes include the Domini 400 Social Index, the first index to employ ESG factors, which
is now named the FTSE KLD 400 Social Index.
As the result of a strategic partnership with FTSE
Group, first announced in October, 2008, the family of 16 indexes developed by KLD Research & Analytics has been rebranded as FTSE
KLD's indexes were designed to facilitate the integration of
environmental, social, and governance (ESG) factors into the investment process. They include the
former Domini 400 Social Index, launched in 1990, which was the first benchmark index to use ESG
factors. The Domini 400 Social Index has been rebranded as the FTSE KLD 400 Social Index.
In constructing the FTSE KLD 400 Social Index, KLD has maintained a composition of 250 FTSE All
World USA companies, 100 additional large- and mid-cap companies chosen for sector diversification,
and 50 smaller companies with superior ESG performance.
For the Index, KLD has employed
negative screening to exclude companies "involved beyond specific thresholds in alcohol, tobacco,
firearms, gambling, nuclear power, and military weapons." KLD also uses financial screens that
measure market capitalization, earnings, liquidity, stock price, and debt to equity ratio.
According to KLD, it "selects companies for the KLD400 that have positive social and
environmental records based on the following issues: community relations, diversity, employee
relations, human rights, and product quality and safety, environment and corporate governance."
The rebranded family of Indexes will be calculated, distributed and licensed by FTSE,
which has created and managed over 120,000 equity, bond, and alternative asset class indexes. KLD
will continue to manage all FTSE KLD indexes, performing the ESG research, maintaining the index
rules and making company selections.
In 2007, FTSE entered into a strategic partnership
with Impax Asset Management, which led to the
launch of the FTSE Environmental Technology (FTSE ET50) Index and strengthened FTSE's presence in
European sustainability indexes.
Following its strategic partnership with KLD, FTSE's
presence in US-based sustainability indexes will be strengthened.