December 13, 2002
Italian SRI Indexes Benchmark European and Global Equity and Bond Markets
by William Baue
Milano, Italy-based E. Capital Partners manages seven SRI indexes.
As socially responsible investing (SRI) continues to mature and expand worldwide, SRI indexes
continue to proliferate globally. In addition to the well-known overseas index providers such as
FTSE4Good, Dow Jones Sustainability Indexes (DJSI), and Ethibel, the Italian independent financial
firm E. Capital
Partners (ECP) offers two equity SRI indexes and five bond SRI indexes.
two equity indexes are the Ethical Index Euro and the Ethical Index Global. The Ethical Index
Euro measures the performance of 150 large-capitalization companies listed on European stock
markets. The Ethical Index Global tracks the performance of 300 companies in 24 countries, not
including emerging market countries. Both benchmarks are reviewed biannually and are calculated
and published as price indexes and as total return indexes, which include returns from paid
All securities included in ECP indexes have passed the firm's ethical screening
process. First, ECP implements negative screens to exclude companies operating in sectors deemed
unsustainable or that disrespect human rights. Second, ECP employs positive screens to identify
companies with high standards of corporate social and environmental responsibility. Third, ECP
uses a best-in-class approach to identify companies with the best social and environmental
performance in their sectors or countries.
ECP's bond indexes cover the European and
global markets separately, with a government bond index and an agency and supranational bond index
for each market. In addition, ECP manages a corporate bond index that covers the European market.
Besides passing ECP's ethical screening process, prospective constituents of the bond indexes must
be rated above BAA3 by Moody's or BBB- by Standard & Poor's.
While many SRI funds in the
United States exclude government bonds because of the exposure to investment in the Department of
Defense, ECP's government bond indexes do not implement such exclusions.
"We do not want
to exclude all governments who support defense because we would have to exclude all government
bonds," E. Capital Partners Analyst Oliviero Gobbi told SocialFunds.com. "We prefer a positive
approach that considers several points of view because we think it is possible to invest in
government bonds in a socially responsible way. We analyze countries under several points of view:
respect of human rights; compliance with international treaties; compliance with I.L.O.
regulations; respect for the environment; and we exclude countries who have the death penalty. . .
. [W]e have excluded all the governments deeply involved in military activities from our
benchmarks. We exclude, for example, the U.S.A., because of the death penalty."
explained its agency and supranational bond indexes in its November 2002 publication, Ethical
Index Management System.
"Agency and supranational benchmarks are a very innovative
product," the document states. "Agencies are those who support the local economies or promote
social welfare programs and housing projects. All have a social goal and work towards sustainable
Some of the agencies included in the ECP indexes are Fannie Mae (ticker:
FNM), Freddie Mac (FRE), the Corporacion Andina de Fomento, and the Development Bank of Japan.
"Supranational bonds are issued by organisations created by governments through
international treaties," the document continues. "They promote cooperation projects in developing
countries and regional integration."
Examples of supranational organizations include the
Inter-American Development Bank and the International Bank for Reconstruction and Development (an
arm of the World Bank).
Finally, the Ethical Index Euro Corporate Bond concentrates the
majority of its weighting (53.03 percent) in the financial sector, with about a quarter of its
weighting (23.38 percent) in noncyclical services. The remaining sector allocations are all at or
below five percent.
ECP's SRI indexes have attracted important institutional clients such
as Mellon Global Investments, San Paolo Wealth Management, Union Investments, and the Societe