September 5, 2008

Top Ethical Investing Indices: A Global Overview

by Ron Robins, MBA*

From my globally popular and respected ethical investing website, Investing for the
Soul

The growth of ethical stock and bond indices around the world has been exciting and
rapid in recent years. There is hardly a continent where they are not represented.
Investors everywhere want to make good returns by doing good. Many mutual funds,
unit trusts, and exchange traded funds (ETFs), are now based on these indices.

The performance of any particular index generally depends on the popularity of the
sectors represented within it. The attention on climate change benefits the green-
sustainability sector which has a narrow focus on green technology and alternative
energy. The socially responsible-ethical indices are more diversified and often follow
larger stock market trends. They usually have little exposure to commodities and
extractive industries, and tend to be heavily weighted in technology, health, finance
and consumer goods. (A review of the articles on our Ethical Investing
Studies/Research page might be helpful in understanding the composition and
performance of these indices and associated funds.)

Here is a brief description, with links, to what I believe are the most prominent of
these indices. Information and performance of funds associated with an index can
usually be found on its website.

Green-Sustainability Indices:

ACT Australian Cleantech Index (Australia)

"The ACT Australian Cleantech Index provides a measure of the performance of the
Australian listed stocks in the Cleantech sector."

FTSE Environmental Technology Index Series (U.K.)

"FTSE Group has launched the FTSE Environmental Technology Index Series in
collaboration with the environmental technology specialist, Impax Asset
Management, to provide two new environmental technology index solutions: the
FTSE ET50 Index and FTSE Environmental Opportunities All-Share Index."

Impax ET50 (U.K.)

The Impax ET50 is a stock index of companies whose core business involves
environmental technologies.

NASDAQ® Clean Edge® U.S. Liquid Series Index (CELS) (U.S.A.)

"The NASDAQ® Clean Edge® U.S. Liquid Series Index (CELS) is a modified market
capitalization-weighted index designed to track the performance of companies that
are primarily manufacturers, developers, distributors, or installers of clean-energy
technologies."
The Renaissance Green IPO Index (U.S.A.)
"The Renaissance Green IPO Index captures the performance of newly public
companies whose products and services offer solutions to environmental problems."

WilderHill New Energy Global Innovation Index (U.K. & U.S.A.)

"The WilderHill New Energy Global Innovation Index is comprised of companies
worldwide whose innovative technologies and services focus on generation and use
of cleaner energy, conservation and efficiency, and advancing renewable energy
generally."

WilderHill Clean Energy Index (U.S.A.)

WilderHill Clean Energy Index is an American Stock Exchange based index, "...
comprised of publicly traded companies whose businesses stand to benefit
substantially from societal transition toward the use of cleaner energy and
conservation."

Socially Responsible-Ethically Focused Indices:

Bovespa ISE (Brazil)

"ISE is designed to measure the return on a portfolio composed of shares of
companies highly committed to social responsibility... corporate sustainability...
good practices in the Brazilian corporate environment."

Calvert Social Index (U.S.A.)

"... the Calvert Social IndexTM, as a broad-based, rigorously constructed benchmark
for measuring the performance of US-based socially responsible companies."

Domini 400 Social Index (U.S.A.)

"... KLD’s Domini 400 SocialSM Index (DS400) is a float-adjusted market
capitalization weighted common stock index modeled on the S&P 500® Index."

Dow Jones Sustainability Indices (Global)

Dow Jones Sustainability Indices are North American and global socially and
environmentally screened stock indices.

FTSE4Good Index Series (Global)

Financial Times of London share indices of socially and environmentally screened
firms. Indices range from individual countries to specific industrial sectors.

India Islamic Index (India)

"The Eastwind Capital Advisors Pvt Ltd., the Indo-Arab Economic Forum and Institute
of Objective Studies launched the EW India Islamic Index... comprises only of
Shariah compliant companies equity and excludes companies engaged in alcohol
products, pork-related products, conventional financial services like banking and
insurance, gambling, hotels and all other business which the Shariah supervisory
board considers as unethical."

Jantzi Social Index (JSI) (Can.)

The Jantzi Social Index is a Canadian socially and environmentally screened share
index.
JSE SRI Index (South Africa)
"The JSE’s Socially Responsible Investment (“SRI”) Index was launched in May 2004
in response to the burgeoning debate around sustainability globally and particularly
in the South African context."

KLD Broad Market Social Index (U.S.A.)

"The KLD Broad Market SocialSM Index (BMS)... capturing the best environmental,
social and governance (ESG) performers in each sector of the Russell 3000...
represents 98% of the capitalization of the US equity market."

KLD U.S. Corporate Bond (USCB) Index (U.S.A.)

"The [KLD U.S. Corporate Bond] investable indexes are the first to apply
environmental, social and governance (ESG) performance factors to a U.S. fixed
income asset class." (I have included here a separate KLD link as this class of index,
an ESG corporate bond index, is the first of its kind in the US.)

LOHAS Index (U.S.A.)

"LOHAS is an acronym for Lifestyles of Health and Sustainability. [Companies in this
index] practice 'responsible capitalism' by providing goods and services using
economic and environmentally sustainable business practices." There are three
indices: the LOHAS Index, Healthy Living Index, and Sustainable Economy Index.

S&P ESG India (India)

"The S&P ESG India index provides investors with exposure to a liquid and tradable
index of 50 of the best performing stocks in the Indian market as measured by
environmental, social, and governance parameters."

SRI Index Malaysia & Singapore SRI Index (Malaysia)

"OWW Consulting launched the Responsibility™ SRI Index Series which aims to
identify companies in Malaysia and Singapore with good CSR (or Economic, Social
and Governance, ESG) reporting... "

From the above it is clear that ethical investors can now invest globally and be well
diversified. Many more ethically-based indices are likely in the years ahead.

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*Ron Robins, MBA, is founder, Investing for the Soul,

(http://investingforthesoul.com/), He advocates, writes and teaches on the subject
of ethical investing. To contact him, e-mail to Ron Robins or call 705-635-3034.

© Ron Robins, 2008. Provided full credit, which includes title, my name, and link to this post is given, anyone
may print or re-produce this article in part, or in full, to any relevant web page.