S&P ESG Index Family

The S&P ESG Index family is the first global family of smart beta indices based purely on ESG research. Traditional sustainability indices are typically based on a sub-selection of components from a benchmark universe, based on companies’ ESG rating. But the S&P ESG Index family follows a different approach previously used in factor investing. The index methodology uses the same components as the underlying benchmark index but weights the components purely according to their ESG profile instead of using free-float market-cap weights. The goal is to achieve better risk-adjusted returns than the underlying benchmark in the long run.
 
The index uses the Smart ESG methodology developed by RobecoSAM to improve risk-adjusted returns. The Smart ESG methodology aims to turn RobecoSAM’s Corporate Sustainability Assessment methodology – used since 1999 – into an unbiased performance factor by applying two key steps:

  1. Remove biases in the ESG data that typically affect the financial performance of ESG data – particularly biases in terms of region, sector, company size and other common factors.
  2. Enhance the financial materiality of the ESG scoring process by systematically overweighting ESG indicators that have contributed positively to stock performance in a risk factor analysis.

The resulting ESG factor scores are uncorrelated to all traditional factors and are therefore applied in the S&P ESG Index family as a stand-alone performance factor.

For more information on the S&P ESG Index family, please see the