Nowadays the term sustainability seems to cover everything, and

financial institutions are adapting to this new way of understanding

the economy. In a gradual but unstoppable fashion, companies are
incorporating sustainability criteria in their management. As a result,
private and institutional investors are starting to call for global
sustainable investment indexes that are rational, solid and reliable
to allow them to monitor the evolving profitability of their sustainable
investments.
Sustainability indexes are instruments to measure the responsibility of a certain
company in social and environmental areas. The more they take these aspects into
account as they develop their business, the higher the score they will obtain. More
questions about sustainability? Here are some answers.

Why are sustainability indexes needed?

“Sustainability indexes are designed and built with the goal of providing information to
institutional and retail investors that value the importance of the companies’
environmental and social responsibility and corporate governance in their everyday
management, in addition to economic results, in their decisions to purchase shares,
”notes Beatriz Fernández, environmentalist and professor at the Instituto Superior de
Medioambiente (Higher Institute of the Environment).
Victor Viñuales, the Director of Ecodes and CSR Professor at the IE Business School,
stresses the difference between socially responsible investments and other investments:
“Instead of asking the three classic questions: the interest it gives, the security, and
availability, it adds the questions ‘where does this go’ and ‘what am I supporting with my
money'".

How are sustainability indexes built?

Independent companies exist that are specialized in designing the methodology for the
assessment, and they also select the companies that will be part of the analysis process.
“These assessment processes, which are repeated at different times, determine which
are the best companies based on their results in economic, environmental and social
areas,” notes Fernández Viñuales, who adds that “one of the problems that could
appear is finding companies with internal communication problems, whose underlying
problems are unknown to the rest of the company.”

Which sustainability indexes currently exist?

There are basically three sustainability indexes that have the largest impact and
representativeness on an international level. In the U.S., it’s Domini 400 social index; in
Europe the two most popular are the Dow Jones Sustainability Indexes and
FTSE4Good.
Dow Jones Sustainability Indices evaluates three spheres of action (economic,
environmental and social) based on approximately 24 parameters. Their scrutiny
amounts to the three scores indicated above and an overall score. They all go from 0 to
100.

Socially responsible companies are attractive because one of their objectives is to increase the value for the
shareholder in the long term.

FTSE4Good gives an overall score of 0 to 5 and a score for each of the six most
relevant areas for them (environmental management, climate change, human rights,
labor rights, labor standards in the supply chain, corporate governance and the fight
against corruption).

Why are they important for investors?

“The more you know about a company, the safer your decision could be. If you only see
the outside, and not the roots - which could be problems with communities, their salary
policy, etc. - this could lead to financial chaos. It’s important to find out whether there are
environment, social or ethical controversies. It’s an analysis of policies and facts,” notes
Viñuales, who emphasizes that nevertheless, “not everyone will have access to this
extra-financial analysis, but it’s important to use it”. Meanwhile Beatriz Fernández
argues that socially responsible companies “are attractive because one of their
objectives is increasing long-term value for shareholders”.

How does CSR affect investments?

As Fernández explains, “Corporate Social Responsibility is a different approach to
business that creates long-term value for shareholders, taking advantage of
opportunities and minimizing the risks from new environmental, social and economic
developments.” The degree of success for a company’s strategy entails
taking advantage of opportunities and minimizing these risks.

How can these risks be measured?

They can be quantified and used to identify and select leading companies that are
attractive for investment. “Since it is possible to economically quantify sustainability,
shareholders have identified the concept as a new discriminating element in their
investments,” says Fernández.

Have these indexes had an impact on Spanish corporations?

According to the environmentalist, the demands and consequences of Spanish
companies’ participation in the scrutiny of the sustainability indexes has had an even
greater influence than the responsibility standards or Global Compact. “Through these
assessments, companies have found a tool for competitiveness, organizational
alignment, international leadership, growth and stability from the value of action. They
are vitally important in planning, programming, and defining projects and fields of action
in corporate responsibility,” she concludes.

What are the indices of sustainability?

Sustainability indexes are instruments to measure the responsibility of a certain
company in social and environmental areas. The more they take these aspects
into account as they develop their business, the higher the score they will obtain

What are the indices of sustainable development?

Some of the most prominent of these include the Human Development Index (HDI)
of the United Nations Development Programme (UNDP); the Ecological footprint of
Global Footprint Network and its partner organizations; the Environmental
Sustainability Index (ESI) and the pilot Environmental Performance Index (EPI)
reported ...

What is the best sustainability index?

The Dow Jones Sustainability Indices (DJSI) are a family of best-in-class
benchmarks for investors who have recognized that sustainable business practices
are critical to generating long-term shareholder value and who wish to reflect their
sustainability convictions in their investment portfolios.

How do sustainability indices work?

To be incorporated in the DJSI, companies are assessed and selected based on
their long-term economic, social and environmental asset management plans.
Selection criteria evolve each year and companies must continue to make
improvements to their long-term sustainability plans in order to remain on the Index.

What are environmental indices?

An environmental index is the combination of multiple sources of information
(i.e., indicators of ecological responses) about an environmental system (e.g.,
a stream) from potentially varying attributes of that system (e.g., instream
processes, ecological processes, species richness, riparian vegetation, etc.).

What are the key metrics for sustainability measurement?

Five sustainability metrics to monitor
• Metric #1 - Climate risk. ...
• Metric #2 - Carbon emissions. ...
• Metric #3 - Energy consumption. ...
• Metric #4 - Water usage. ...
• Metric #5 - Waste & pollution. ...
• Getting started.
What is the formula for sustainable development?
Answer: Sustainable development means conservation and development of
resources without harming the natural environment and economic interest.
Hence, the formula of sustainable development is pres (preservation) +
cons (conservation).