ASPI Eurozone is the first of a family of indexes that will include companies based solely on their sustainability performance.
ARESE, a Paris-based firm that conducts research on corporate social, environmental and sustainability performance, recently announced the introduction of the first of a series of new indexes. The first index, the ASPI Eurozone, will track the financial performance of companies in the Eurozone that are leaders in sustainability. The Eurozone comprises the European Union members that have adopted the Euro.
The new series of indexes, called ASPI, uses corresponding Dow Jones STOXX indexes as a benchmark financial universe, but include only companies that have been rated highly in terms of sustainability. ASPI is an acronym for ARESE Sustainiable Perfomance Indexes.
The indexes are a real landmark in terms of the institutionalization and mainstreaming of SRI on the Continent," said Sarj Nahal, Senior Analyst with ARESE. "We have reached a point in terms of assets under management for SRI where people are looking for benchmarks."
ASPI takes a positive approach toward corporate sustainability, including companies that set good examples for sustainability or are moving toward best practices. There are no exclusionary screens, so conceivably the indexes could include tobacco and other controversial business lines often excluded by many funds in the U.S.
ARESE’s ratings for corporate sustainability performance are based on five criteria: community and international civil society; corporate governance; customers and suppliers; health, safety and the environment; and human resources and international labor standards. Companies are assessed on each of these five criteria in terms of their leadership, implementation and results.
The ratings are done by sector, so companies are compared to other companies with similar impacts on stakeholders and similar risks. The ratings for each criteria translate into five scores for each company, which are averaged geometrically to yield a mean corporate sustainability score. Because a geometrical average is used, any company scoring zero, the lowest score, on one of the criteria receives a zero mean score and therefore is excluded from the index.
As on overall policy, ARESE has decided that only the top 50 percent of the companies it has ranked shall be included in ASPI at any given time.
ARESE aims to assess and rate as many companies as possible that are listed on the relevant STOXX financial benchmark index, regardless of market capitalization. If, however, the relative weight of any company is found to be greater than 10 percent, the weighting of the company will be capped at 10 percent.
ARESE is planning to review the ASPI series quarterly on the basis of its ongoing sustainability assessments and any changes in its ratings. If a company is dropped from ASPI due to a change in the corresponding STOXX index, it will be replaced by the next best-ranked company regardless of industry sector. ARESE is also planning to review its assessment methodology annually.
While a company’s financial results do not affect whether it is included in ASPI, ARESE believes the indexes should perform well. "Between 1992 and 2001, the APSI Eurozone would have outperformed the Dow Jones Euro Stoxx by 20 percent," said Nahal. "Between 1998 and 2001, it would have done 7 percent better."
The ASPI series includes country-specific indexes based on corresponding Dow Jones STOXX indexes as well as ASPI Europe and ASPI Global. According to Nahal, the first country-specific index will be ASPI France, which will debut in September of this year. Introduction of ASPI Europe, which will cover the U.K. and other countries outside the Eurozone, is planned for the end of this year or early 2002. ASPI Global will be launched toward the end of 2002.