August 27, 2002
Four New Indexes Track Best Practice Companies
by William Baue
The Ethibel Sustainability Indexes apply positive screens for sustainable development and
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.
to spokesmen at the Flemisch Care Fund, the Ethibel Sustainability Index is named the preferred
choice," said Mr. Jacobs.