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The Dow Jones Sustainability Index (DJSI) emerged during a time when the concept of integrating environmental, social, and governance (ESG) factors into investment strategies was considered to be niche. By offering a concrete and transparent method for evaluating companies on these factors, the DJSI played a crucial role in mainstreaming sustainability in global financial markets.
Since its inception in 1999, the DJSI has expanded its reach, introducing regional and sector-specific indices which has created a more nuanced understanding of sustainability performance across different industries and regions. As its influence has grown, more and more companies have sought to seek inclusion in the DJSI, with many using the index's criteria as a framework for enhancing their sustainability initiatives.
👉 In this article we’ll explore how companies are selected by the DSJI, and the benefits of being included.
Created in 1999 under a strategic partnership between S&P Dow Jones Indices and the Swiss firm RobecoSAM (Sustainable Asset Management) to provide investors with a clear metric for tracking the performance of companies committed to sustainable business practices. The index evaluates companies across various sectors and selects those that demonstrate strong sustainability leadership, serving as a guide for investors who prioritise the sustainability performance of companies in their investment decision-making processes.
In recent years, the significance of the DJSI has grown as investors increasingly recognise the value of sustainability in corporate strategy. Companies included in the DJSI often publicise the fact as it demonstrates their commitment to addressing sustainability challenges.
However, inclusion in the DJSI requires companies to undergo a rigorous assessment, focusing on various metrics like climate strategy, corporate governance, and stakeholder engagement. But the rewards make the process worth it - achieving a spot on the DJSI not only reaffirms a company’s dedication to sustainability but also positions them favourably in the eyes of eco-conscious investors.
👉 To find out more about ESG investing and why it’s fast becoming one of the most popular investment trends, head over to our article on the topic.
The Dow Jones Sustainability Index (DJSI) plays an important role in the global sustainability landscape. As one of the longest-running global sustainability benchmarks the DJSI has had a significant impact on shaping corporate behaviours and investor decision-making.
The DJSI is one of the most prestigious benchmarks for corporate sustainability and has helped to set the standard for what it means to be a responsible, forward-thinking company. Companies across the world often use the DJSI criteria as a roadmap for improving their own environmental, social, and economic practices. The rigorous assessment criteria of the DJSI push companies to evaluate their operations holistically, considering not only profitability but also their impact on society and the environment. By doing so, the DJSI effectively nudges the global corporate community toward more sustainable practices.
👉 To learn more about ESG and the benefits it can bring to your company, take a look at our article.
The DJSI (Dow Jones Sustainability Index) methodology is a set of criteria and guidelines used to assess the sustainability performance of companies.
The methodology consists of several steps:
The DJSI methodology aims to provide investors with a comprehensive and objective assessment of companies' sustainability performance. It helps identify companies that demonstrate strong ESG practices and are committed to long-term sustainable development.
To be considered for inclusion in the DJSI, companies must meet certain criteria related to sustainability. These criteria are based on a comprehensive assessment of economic, environmental, and social factors. The assessment evaluates companies on various dimensions, including corporate governance, risk management, climate change strategies, environmental performance, labour practices, human rights, and stakeholder engagement.
Companies are selected for inclusion in the DJSI based on their sustainability scores, which are determined through a rigorous evaluation process. This process involves analysing a company's sustainability practices and performance, comparing it with industry peers, and benchmarking against global standards.
While the specific criteria may vary slightly each year, the assessment generally focuses on the following areas:
Companies are scored based on their performance in each criterion, and the scores are compared with industry peers to determine inclusion in the DJSI. The assessment process is rigorous, involving extensive data collection, analysis, and verification.
💡 Companies that rank within the top 10% of their industry are selected to be a part of DJSI World. In 2022, the list consisted of 332 companies.
In addition to DJSI World, there are also regional indexes: for example DJSI Europe, Nordic, North America, and Asia Pacific. The DJSI also selects industry-specific indexes.
It should also be noted that in order to stay on the DJSI, companies must continue to make improvements to their long-term sustainability strategy.
👉 If this topic interests you, why not also take a look at our article on ESG reporting.
The data collection methods typically involve a combination of self-disclosure by companies and external data sources. Here are some key aspects of data collection for the DJSI:
It's worth noting that the specific data requirements and indicators may vary depending on the industry and region. The DJSI aims to capture a comprehensive picture of a company's sustainability performance by considering multiple dimensions and indicators.
❗️There are certain business categories that are excluded from being considered, for example: companies operating in the controversial weapons market, tobacco market, adult entertainment industry, gambling sector, and alcoholic beverage sector. Details on the thresholds for exclusion can be found here.
Companies cannot apply directly for admission into the DJSI. Selection is based on an annual assessment conducted by S&P Dow Jones Indices and RobecoSAM.
Some of the benefits of being selected for the DJSI include:
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If reading this article has inspired you to consider your company’s own carbon footprint, Greenly can help. Learn more about Greenly’s carbon management platform here.
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