S&P Dow Jones Indices has launched the S&P South Africa Domestic Shareholder Weighted ESG Index, the newest addition to its global Environmental, Social and Governance (ESG) index family.

Reid Steadman, Global Head of ESG, S&P Dow Jones Indices, said: “The S&P South Africa Domestic Shareholder Weighted (DSW) Capped ESG Index is a broad-based, market-cap-weighted index that is designed to measure the performance of securities meeting sustainability criteria, while maintaining similar overall industry group weights as the S&P South Africa Domestic Shareholder Weighted (DSW) Capped Index. It can serve as a benchmark as well as the basis for index-linked investment products.”

The new index is expected to be the core benchmark for the region, helping to transition to a more sustainable South Africa.

The index integrates sustainability criteria, by targeting a selection of 75% of market capitalization of each GICS Industry Group and excludes tobacco, controversial weapons and companies not in compliance with UN Global Compact.

The result is an ESG index version whose risk and return profile is closely in line with that of S&P SA DSW Capped Index (its country parent) despite the various exclusions the methodology requires. 

Steadman said that while ESG has long been of great interest to investors, market participants are becoming increasingly sophisticated in integrating ESG factors into their investments

“An increasing number of investors require indices that are aligned with their investment objectives and their personal or institutional values. S&P Dow Jones Indices’ Environmental, Social and Governance (ESG) index family has been designed with both of these needs in mind, and the new index is expected to be the core ESG benchmark for the region, helping to transition to a more sustainable South Africa,” Steadman told Africa Global Funds.

According to Steadman, S&P Dow Jones Indices has five ESG indices for South Africa namely: S&P SA DSW Capped ESG; S&P SA DSW Capped Carbon Efficient; S&P SA DSW Carbon Efficient; S&P SA Composite Carbon Risk Price Adj 2030 and DJ SA Composite Sustainable Index.