Morningstar has added to its range of sustainability indices with the launch of the Morningstar Eurozone Societal Development Select 80 index.
The index will provide investors with exposure to large- and mid-cap eurozone-based companies with a “stronger commitment” to policies aligned to the United Nations’ Sustainable Development Goals, and which support economic development in emerging markets.
Morningstar said the index has been exclusively licensed by HSBC.
The index’s starting point will be the Morningstar Eurozone Large-Mid Cap index, with around 400 companies, and it will then apply societal development scores, as well as filtering by company revenue, to bring the number to 80.
To qualify for a social development score, a company must meet at least five of 32 key performance indicators identified by Sustainalytics, such as gender pay disclosure; fair trade products; human rights; working hours; and bribery and corruption policies, the data provider explained.
Once eligible, a company’s score is calculated based on its rankings across key performance indicators for social and economic development policies.
This includes what percentage of the company’s revenue is derived from ‘low-‘ or ‘low-middle-income’ markets, according to the World Bank’s definitions.
Some of the companies selected for the index include Veolia and LVMH, Morningstar said.
“We are excited to collaborate once again with HSBC to offer an ESG index-based approach for structured product investors,” said Julien Thibaud, global head of derivatives and exchange business development at Morningstar Indexes.
He added, “This new index draws on the leading global index methodologies of Morningstar Indexes and is based on the leading ESG research and data of Morningstar Sustainalytics.
It is designed to address growing investor interest in impact and societal development-related investment strategies and market exposures.”
Vikram Puppala, global head of ESG products for Morningstar Sustainalytics, said, “Companies operate in an interconnected socioeconomic context that affects human development through multiple lenses.
These kind of collaborative index initiatives are a way forward for investors to meaningfully address basic social needs in global regions where it’s most urgent.”
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