An invitation from the DJSI should ALWAYS be accepted
By Robert Dornau, Senior Manager Sustainability Services, RobecoSAM AG, Zurich
Do you want to add credibility to your sustainability actions and do you want to gain business value in the process? Do you want to be challenged to look into new sustainability areas? And do you really want to understand how you measure up against your peers?
Every year, RobecoSAM invites 3,000 of the world’s largest publicly listed companies to participate free of charge in our annual Corporate Sustainability Assessment (CSA). Participating industry leaders combine 45 percent of the globally listed market cap, which makes the CSA an acknowledged global standard for corporate sustainability. The leading companies are selected for the prestigious Dow Jones Sustainability Indices.
In Australia, the top 200 companies listed on the Australian Securities Exchange (ASX) will be invited to participate in the assessment.
Benefits of participation
Investors and other stakeholders use the results. Many companies find that participating in the assessment leads to external recognition for their efforts and helps them identify ways to improve their sustainability strategies. Some benefits of participation in the DJSI include:
- benchmarking practices
- setting targets and providing independent validation of policies
- building the internal case for sustainability
- understanding external expectations, and
- engaging with investors, clients and stakeholders.
Some companies may not realise that RobecoSAM will assess their sustainability performance even if they don’t participate in the CSA. In addition to being used as the basis for the construction of our full range of sustainability indices, the insights derived from the CSA are fully integrated into RobecoSAM’s asset management offering and to a large degree of its parent company Robeco. Data is also used to conduct empirical in-house research or to cooperate with academic institutions to measure the impact of corporate sustainability performance on financial performance.
So it’s always worthwhile to complete the CSA to ensure RobecoSAM has the most accurate and complete information on which to base their assessment.
Leading global impact
An independent survey conducted by Globescan and SustainAbility in 2013 confirmed that the Dow Jones Sustainability Indices, which are based on RobecoSAM’s Corporate Sustainability Assessment or short CSA, have “the most positive impact on sustainability performance” and is the assessment “most familiar to experts”.
A more recent survey by Corporate Citizenship conducted with over 200 sustainability professionals asked practitioners to name, unprompted, the world’s leading sustainability ranking initiative. We are very proud that over two thirds named the DJSI.
Two-thirds of practitioners working within companies also ranked DJSI first in terms of external credibility, and one-fifth put it second. Around three-quarters of practitioners with experience of taking part in DJSI said it adds “significant value” to their business.
Approach to sustainability
First and foremost we are an asset manager and not a rating agency. We approach sustainability with the eyes of an investor trying to identify the most financially material aspects across all three dimensions of sustainability: economic, social, and environmental.
For us sustainability means a company’s capacity to prosper in a competitive and changing global business environment, given the often-cited mega challenges a company faces today. This includes climate change and energy efficiency, ecosystems and pollution, water and resource scarcity, urbanisation, shifts in consumer behaviour and the acceleration of global change in general through for example the increased access to information in an online society.
This integrated approach to company valuation considers a combination of financial and non-financial data leading investors to make better informed decisions.
How the DJSI is calculated
Only the top ranked companies in terms of corporate sustainability within each industry are selected for inclusion in the Dow Jones Sustainability Index family, following a best in class approach. This means no industries are excluded from this process.
Why best-in-class? Because industry-specific sustainability opportunities and risks can play a key role in companies’ long-term success. Aside from the selection of the sustainability leaders on the basis of clearly defined criteria, the best-in-class approach also provides RobecoSAM with the opportunity to conduct a dialogue with companies from all industries and thereby influence incremental improvements in companies’ sustainability practices.
To be included or remain in the index, companies have to continually intensify their sustainability initiatives. RobecoSAM believes this approach will benefit all stakeholders: investors, employees, customers and, ultimately, society and the environment.
Measuring performance and scorecard
Companies in the DJSI are assessed by applying consistent rules-based approach, tailored to 59 different industries. These results are calculated with aggregated data points from questions and themed criteria, across economic, environmental, and social dimension. Examples of criteria are corporate governance, innovation management, operational eco-efficiency, and talent attraction and retention.
Measurement indicators are used to assess the level of sustainability integration within a company while business goals are used to measure performance issues that are material to companies.
The results of the DJSI report are provided to the participating company free of charge in a detailed scorecard, translating intangible sustainability factors across all dimensions into tangible scores allowing for comparison of around 20 criteria. There is a breakdown of each company’s performance according to specific criteria levels providing baselines against which to measure any potential future improvements. These areas are easily analysed for improvement and provide a benchmark to measure against competition. The comparative scoring is best understood by comparing the average score achieved by the DJSI score with peers’ scores in different regions, or comparing the percentile ranking of the company against all rated companies in the industry.
Opportunities for Australian companies
Australian companies could be eligible for three DJSI indices: the DJSI World, DJSI Asia Pacific, and DJSI Australia. DJSI World invites the 2,500 largest companies globally; DJSI Asia Pacific invites the 600 largest companies headquartered in Australia, Hong Kong, Japan, New Zealand, Singapore, and Republic of Korea. DJSI Australia covers the ASX 200.
Australian companies perform very well over all. Last year 19 were members of DJSI World and 27 members of DJSI Asia Pacific. There is a large interest in the DJSI components lists; they are downloaded on average 750 times per month, equalling one download per hour.
RobecoSAM Sustainability Yearbook provides the opportunity of additional recognition and visibility for sustainability leaders. It is one of the world‘s most comprehensive publications on corporate sustainability, providing sector insights into the sustainability challenges and opportunities for companies as well as showing the sustainability leaders. The 2015 edition was distributed in 3,000 printed copies; there were 11,000 impressions of the live paper on the web and almost 40,000 visitors to the yearbook website. Last year 23 Australian companies were included in RobecoSAM’s sustainability yearbook, six of those with gold medals. Westpac and Stockland are mentioned as leaders in their respective industries.
Performance of Australian companies
DJSI Australia includes the top 30 percent of ASX200 companies, whereas Europe and North America only include the top 20 percent of invited firms. Over the last four years, Australian companies improved strongly, particularly in the social dimension. The top 30 percent of companies in Australia are now on average scoring equally well as the top 20 percent of North American companies in the environmental dimension and lag by just one point in the economic dimension.
The invitation list was published online in early February, with invitation letters going out in March to participate in the DJSI assessment. Two dedicated webinars provide a platform to introduce the online assessment platform (17 March) explain new or changed questions (22 March) in the detailed online survey. The assessment opens on 5 April and closes 31 May 2016. First time applicants may request an extension if required.
The DJSI results will be published on 8 September 2016. Throughout the process, RobecoSAM has a helpline available to assist with questions regarding the questionnaire and links to GRI reporting. Questions can be submitted via email or a phone hotline to assist with any queries regarding the scorecard, scoring, or the methodology.
The cooperation between RobecoSAM and S&P Dow Jones Indices for the publication and licensing of the DJSI was launched in 1999. The DJSI Australia Index was first calculated on February 28, 2005.
Some useful links:
- Information on the DJSI and index guidebooks: www.sustainability-indices.com, including the list of invited companies
- To read interviews with CSA participants, and get answers to frequently asked questions and benefits of participation
- For information in the Sustainability Yearbook: yearbook.robecosam.com
Important legal information: The details given on these pages do not constitute an offer. They are given for information purposes only. No liability is assumed for the correctness and accuracy of the details given.
 It is important to note is that the size of a company is measured by free float market cap. The 2015 cut off for DJSI World was $2.5 BN USD. Calculation by free flow market cap means that any holding above e.g. five percent (depending on market) is not included in the calculation.
Copyright © 2016 RobecoSAM