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August 27, 2002
Four New Indexes Track Best Practice Companies
    by William Baue

The Ethibel Sustainability Indexes apply positive screens for sustainable development and stakeholder involvement.


The continued introduction of socially responsible investing (SRI) benchmarks is giving investors more tools to track the performance of sustainable companies on a global level. The latest offering is the Ethibel Sustainability Indexes (ESI), which were launched in June by Ethibel, a Belgian non-profit. Earlier this year Ethibel was named a best practice SRI analysis organization by the Swedish environmental foundation MISTRA in its Screening of Screening Companies report. The Ethibel Sustainability Indexes cover four regions: ESI Global, ESI Americas, ESI Europe, ESI Asia Pacific.

"All of the companies included in the indexes are part of the Ethibel Investment Register," said Ethibel Marketing & Sales Manager Kurt Jacobs. "Ethibel applies its own screening methodology and evaluation using two of the strongest concepts of corporate social responsibility: sustainable development and stakeholder involvement. Ethibel believes in integrating the people, planet, profit [or triple-bottom-line] approach."

Ethibel focuses on best practice, selecting companies that lead their sector in sustainable business practices. Ethibel assesses four main fields of practice: internal social policy, environmental policy, external social policy, and ethical economic policy.

"Ethibel does not apply negative or exclusionary screening," Mr. Jacobs told SocialFunds.com.

However, Ethibel does take into account companies' involvement in "disputable practices," such as nuclear energy, alcohol, firearms, animal testing, gambling, and pornography, in its assessment. Such involvement could lower a company's rating, which ranges from 0 (worst) to 6 (best). Ethibel arrives at these ratings through dialogue with not only the company, but also its various stakeholders.

"Any information we receive from a company is checked with independent parties, such as trade unions and environmental organizations," said Ethibel Head of Research Dirk Van Braeckel.

Ethibel has contracted Standard & Poor's to maintain and calculate the indexes, which comprise 151 companies. Ethibel hopes to expand this number to 225 or 250 by the end of 2003.

"There is no fixed market capitalization per sector or industry group for the index group when compared to the S&P Global 1200," said Mr. Jacobs.

Ethibel monitors companies on a daily basis, and reviews the composition of the indexes on a quarterly basis. SocialFunds.com posts daily closing results for all four indexes on its homepage.

"Performance is slightly better than broad market indexes like the S&P Global 1200 over the last four years," said Mr. Jacobs. "However, figures are not historical, but backtracking of the universe of constituents from the launch date of the indexes (June 27, 2002.) Ethibel believes that SRI funds and indexes in general will show a comparable performance with traditional funds."

Currently there are no investment products based on the new indexes. However, there are indications that the indexes may be used in some managed accounts. A new Belgian law effective at the beginning of 2003 will require all pension funds in the country to report publicly on their SRI policies and initiatives, much like the UK Pension Disclosure Regulation adopted in July 2000. The $375 million Flemisch Care Fund reportedly intends to invest up to 35 percent of its assets in stocks using SRI criteria.

"According to spokesmen at the Flemisch Care Fund, the Ethibel Sustainability Index is named the preferred choice," said Mr. Jacobs.

 

 
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