Last week, S&P (of '500' fame) announced the launch of the first socially responsible India index, the S&P Environmental Social and Governance India Index. According to the KLD press release, the ESG India Index is "the first investable index of companies whose business strategies and performance demonstrate a high level of commitment to meeting ESG standards" in India and is comprised of 50 companies (from among the largest 500 listed on the National Stock Exchange of India). The decisions to include or exclude were made by a consortium of three companies: S&P (whose area of expertise is governance metrics and indices), KLD (social and environmental research firm) and CRISIL (Indian business and regulatory context). The language of the press release is consistent with the current and favorable tone of assuring investors that "the profit motive is brought into alignment with public interest".
The ESG India Index is also the first of its kind to use quantitative and not subjective factors as its criteria.
Specifically, what did they look at?
According to the Methodology Factsheet, the critera in "assessing environment and social conduct" are:
1. Environment (pollution, natural resources use, management policy and performance indicators)
2. Employees (employee relations/job creation, labor rights, equal opportunity, union relations)
3. Community (human rights, community investment)
4. Consumers/Product (product safety, anti-trust, customer outreach and product quality)
(Additonal governance-related criteria is also available on S&P's site)
Now we wait to see how the socially responsible India Index fares compared to the standard everything-goes India Index. We also wait eagerly for a similar Consumers/Product evaluation and monitor for China, so that owners of dogs who eat dog food, parents of small children who play with toys, and cancer patients who take certain types of cancer medication can find some institutionally-officiated dose of assurance.
Disclosure: I own mutual funds that are index-based products, based on standard US indices as well as some non-standard indices such as KLD.
Photo:ianwatkinson, Creative Commons, Flickr