ADVANCED SUSTAINABLE PERFORMANCE INDICES (ASPI) ASPI EUROZONE GUIDELINES

Transcription

1 ADVANCED SUSTAINABLE PERFORMANCE INDICES (ASPI) ASPI EUROZONE GUIDELINES Version 1.4 September 2010

2 TABLE OF CONTENTS 1 INTRODUCTION The Advanced Sustainable Performance Indices ( ASPI ) Parties to the calculation of the ASPI index Philosophy Behind the Indices Objectives of the Indices 4 2 ASPI EUROZONE METHODOLOGY Introduction Reference index Vigeo Methodology ASPI Scoring System From Vigeo ratings to ASPI scores Geometrical averaging Composition of the Index Exclusion criteria Market capitalisation rules Selection rules 7 3 CALCULATION OF THE INDEX Introduction Current Rules Currency Rates Dividend Treatment Free Float Market Capitalisation Free Float Weighting Cap Factors Index Formula and Index Divisors Price and Total Return Indices Euro & U.S. Dollar Indices Base Dates & Base Values 9 4 MANAGEMENT AND REVIEW OF THE INDICES Management of the Indices Introduction to the Review Process Annual review Methodology Review Selection Review and Buffer Mechanism Review Dates Quarterly Reviews Changes due to ASPI scoring or involvement in exclusion criteria Changes due to market changes Quarterly Review Dates On-going Review and Maintenance Initial Public Offerings (IPOs) Spin-offs Mergers and Acquisitions Changes to weightings 12 5 DISSEMINATION OF THE INDEX Introduction Index Dissemination Period 13 2 / 13

3 1 INTRODUCTION 1.1 The Advanced Sustainable Performance Indices ( ASPI ) The ASPI (Advanced Sustainable Performance Indices) are equity indices tracking the financial performance of leading sustainability performers. Launched by VIGEO in July 2001, they have since been heralded as an important new reference for corporate sustainability and socially responsible investment ( SRI ). The ASPI use the Vigeo sustainability rating system, which centres on a positive approach to sustainability and SRI. The ASPI Eurozone was the first of the ASPI family to go live (July 2001) and is a broad-based equity index tracking the financial performance of the Eurozone s top 120 sustainability performers. 1.2 Parties to the calculation of the ASPI index VIGEO IEM FINANCE STOXX Limited With over fifteen years of experience, Vigeo is the leading rating agency in Europe specialising in the environmental, social and gouvernance evaluations of companies worldwide.vigeo employs 90 employees of 14 different nationalities, based in 4 locations: Paris, Brussels, Milan, Casablanca. The ASPI indices are the property of VIGEO. They use VIGEO s rating system, which centres on a positive approach to sustainability and SRI. IEM Finance is a well-established and independent consulting firm specialising in stock index management. It has been entrusted by Vigeo to implement the methodology for the selection of indices components and more generally to manage the indices. The ASPI Eurozone is calculated and disseminated by STOXX Limited, which is the leading producer of equity indices in Europe. 1.3 Philosophy Behind the Indices A Best-in-class Perspective The ASPI is committed to the disclosure and the promotion of best management performances in terms of social (human rights and human capital), environmental, corporate governance objectives and in terms of market behaviour and community involvement. A Positive Screening Approach The ASPI is rooted in a positive approach towards corporate sustainability. As such, companies are selected for inclusion primarily on the basis of positive screening. The only exclusion criteria concern companies involved in the production or distribution of anti-personnel landmines and cluster munitions since these activities are prohibited by international treaties. 3 / 13

4 1.4 Objectives of the Indices Leading institutional investors, corporations and stakeholder groups have expressed to Vigeo their need for SRI indices that reflect cutting-edge sustainability thinking and offer a positive assessment of corporate performances. Therefore, the ASPI aims to: Offer consistent standards and definitions of sustainability and SRI; Serve as a basis for investment funds, trackers and benchmarks for socially responsible investing; Encourage dialogue and debate on sustainability and SRI; Help stakeholders in their assessment of companies social responsibility performances Encourage investment in companies that match the ASPI criteria, thus stimulating the growth of sustainable policies and practices; and Help investing institutions by providing a list of the best performing companies in terms of corporate social responsibility, which can be used to complement traditional financial analysis. 4 / 13

5 2 ASPI EUROZONE METHODOLOGY 2.1 Introduction The ASPI Eurozone tracks the financial performance of the top 120 sustainability performers in the Eurozone. Companies are selected for inclusion in the ASPI Eurozone on the basis of their corporate sustainability performance as assessed and rated by VIGEO. 2.2 Reference index The reference index is the EURO STOXX. All companies included in the reference index are eligible for inclusion in the ASPI Eurozone (with the exceptions described in section 2.5). 2.3 Vigeo Methodology Vigeo defines corporate social responsibility ( CSR ) as the commitment of companies to integrate into their strategy, management and business practices the legitimate rights and expectations of stakeholders. Vigeo considers that solid CSR management practices helps mitigate risks (on reputation, license to operate, human capital, ) and are a source of opportunities and continuous improvement for companies. Its methodology is based on internationally recognised standards emanating from international organisations such as the United Nations, OECD, ILO. Vigeo assesses and rates the performances of companies in 6 areas of corporate environmental, social and governance responsability, namely: Environment Human Rights Human Resources Community Involvement Business Behaviour Corporate Governance Vigeo follows a three-step analytical process for each criteria under review: 1) Leadership Integration of CSR objectives in the company s strategy and policies 2) Implementation Programmes and actions undertaken by the company to put CSR policies and strategies into practice throughout their operations 3) Results Level of performance achieved by the company, measured through quantitative indicators and exposure to controversies. Vigeo assigns a rating to companies for each of the six CSR domains under review. 5 / 13

6 This rating indicates the relative performance of a company in comparison to peers within its industry sector. VIGEO Rating Scale per domain Leader + + Advanced + Average = Below average Unconcerned For a full description of the rating methodology of Vigeo, please refer to ASPI Scoring System From Vigeo ratings to ASPI scores Vigeo ratings are translated into ASPI score using the equivalence table below. VIGEO Assessment VIGEO Rating ASPI Score Leader ++ 4 Advanced + 3 Average = 2 Below Average 1 Unconcerned Geometrical averaging In turn, the six ASPI scores (relating to each of the six CSR domains) are geometrically averaged leading to a mean sustainability score which determines a company s overall ASPI ranking (the highest score getting the highest ranking and the lowest score getting the lowest ranking). A geometric average means that any company with a score of 0 in any CSR domain (meaning that the company belongs to the unconcerned category) will obtain a final score of 0 and therefore be excluded 1 from the ASPI Eurozone. Illustrative Example of the ASPI Geometric Averaging System Company Environment Human Rights Human Resources Community Involvement Business Behaviour Corporate Governance Geometric Average Rank Company X Company Y Company Z Excluded 1 VIGEO believes that this will encourage the selection of companies that demonstrate a holistic view towards sustainability issues and do not neglect a particular category of stakeholders. 6 / 13

7 2.5 Composition of the Index Exclusion criteria Companies involved in the production or distribution of anti-personnel landmines or cluster munitions, prohibited under the Ottawa Convention or the Cluster Munitions Convention respectively, are not eligible for inclusion in the ASPI Eurozone. This concerns companies involved in any of these activities either directly or indirectly (with a minimum 20% ownership threshold) Market capitalisation rules Companies holding over 50% of the total market capitalisation of other eligible companies are themselves not eligible to the index (for example Christian Dior holds a majority stake in LVMH and is therefore not eligible to the ASPI Eurozone ) Selection rules The number of constituent companies in the ASPI Eurozone is fixed at 120. It is, however, important to note that the number of constituents may temporarily fall below 120 (for instance when a company is removed from the reference index between two quarterly scheduled ASPI reviews). The ratings of EURO STOXX constituents by Vigeo determine their ASPI rankings and their eligibility to the ASPI Eurozone index, as described in section 4. If the ASPI Committee has to choose between several companies receiving equal final scores and rankings, it will first select the company whose selection has the greatest effect in reducing the absolute industry sector gap between the ASPI Eurozone and the reference financial index. This process may be iterated if several companies have to be selected among equally rated companies. Sectoral nomenclature is the one currently used by STOXX Limited for the reference index. 7 / 13

8 3 CALCULATION OF THE INDEX 3.1 Introduction The ASPI Eurozone is calculated according to the same formula and with the same free float weightings as the EURO STOXX index (please refer to for further details on the methodology of EURO STOXX indices). However, if at the end of any quarter, the relative weight of any one constituent in the total free float market capitalisation of the ASPI Eurozone is greater than 10% of the total float the weighting of any such constituent will be reduced to 10% by a weighting cap factor that is fixed until the next quarterly review. 3.2 Current Rules Currency Rates The ASPI Eurozone is calculated and disseminated in (EUR) every 15 seconds from 9.30 am CET to 5.30 p.m. CET using real-time stock prices. At closing, the ASPI Eurozone is also calculated in $ (USD) using opening and closing prices. After closing, basic data and statistics including open, close, high and low prices as well as other key index values are published Dividend Treatment The dividend treatment for the ASPI Eurozone is calculated and processed by STOXX Ltd following the same rules that govern the reference index Free Float Market Capitalisation The ASPI Eurozone is weighted by free float market capitalisation Free Float Weighting Cap Factors A stock s free float weighting is its free float market capitalisation expressed as a percentage of the total market capitalisation of the index. The free float weightings of the stocks are capped at 10% in the ASPI Eurozone by free float weighting cap factors calculated at the quarterly reviews: If the free float weighting of a stock is less than 10%, then its free float weighting cap factor is 1.0 If the free float weighting of a stock is more than 10%, then its free float weighting cap factor is adjusted to reduce the weighting to 10% Index Formula and Index Divisors The index formula and the index divisors for the ASPI Eurozone are calculated and processed by STOXX Ltd following the same rules that govern the reference index. The ASPI Eurozone is calculated using the Laspeyre s formula, which measures price changes against a fixed base quantity weight. The ASPI Eurozone has a unique index divisor, which is adjusted to maintain the continuity of index values in light of changes brought about by corporate actions Price and Total Return Indices The ASPI Eurozone is calculated as price and total return indices the difference being with regard to dividend treatment. Price and total return indices for the ASPI are calculated and processed by STOXX Ltd following the same rule as edicted by STOXX Ltd for the reference index. 8 / 13

9 3.2.7 Euro & U.S. Dollar Indices The ASPI Eurozone is calculated with the stock prices converted to Euros ( ) and U.S. dollars ($US), as appropriate. Price and total return indices for the ASPI Eurozone are calculated and processed by STOXX Ltd following the same rule as edicted by STOXX Ltd for the reference index. The Euro-price index is calculated in real time during the index dissemination period Base Dates & Base Values The base of the ASPI Eurozone is 1000 (as of 31 December 2000). For indicative and comparative purposes, the ASPI Eurozone is calculated using current components from 1 January / 13

10 4 MANAGEMENT AND REVIEW OF THE INDICES 4.1 Management of the Indices The management of the ASPI including the ASPI Eurozone is overseen by the ASPI Committee, which is composed of representatives from Vigeo and IEM. The role of the ASPI Committee is to: dialogue with STOXX Limited on technical issues; establish the framework for the selection process; manage the scheduled annual and quarterly review meetings; implement additions to and deletions from the index; control and disseminate information to the public; decide on actions between scheduled meetings; engage with corporations or stakeholders in case of contentious issues; prepare and validate methodological changes; and anticipate the on-going evolution and development of the indices. The ASPI Committee deals with these tasks on an on-going basis. In addition, it meets formally at quarterly and annual review meetings. 4.2 Introduction to the Review Process The ASPI Eurozone is subject to scheduled annual and quarterly reviews as well as on-going monitoring throughout the year overseen by the ASPI Committee. Reviews are governed by two over-riding principles: the composition of the ASPI Eurozone follows the day-to-day composition of the reference index (including any changes thereto). As such, any company in the ASPI Eurozone that is excluded from the reference index will be removed from the ASPI Eurozone on the same day. any changes in Vigeo ratings, which would have an impact on a company s inclusion or exclusion from the ASPI Eurozone will be implemented at a scheduled annual or quarterly review. 4.3 Annual review Methodology Review The annual review is conducted in September. It involves a full review of the index composition based on Vigeo ratings Selection Review and Buffer Mechanism In order to reinforce the ASPI s focus on promoting sustainability, the annual review includes a global assessment and review of the CSR performance of all companies included in the reference index. However, only 120 companies are included in the ASPI Eurozone : The top 100 ranked companies in the ASPI ranking (see section above) are automatically selected for inclusion in the ASPI Eurozone. The selection of the remaining 20 companies is subject to the application of a buffer that has been designed to maintain the overall stability of the index and minimise changes to its composition. 10 / 13

11 The buffer applies to companies ranked between 100 and 140 at the time of the annual review and already included in the ASPI Eurozone. These companies remain included in the ASPI Eurozone (up to a maximum of 20 companies). If, following this, the number of constituent companies remains below 120, then the best ranked companies in the ASPI ranking are included in the index Review Dates The results of the annual review process and any changes to the ASPI s constituents will be announced on the first Friday of September. Implementation of any changes to the ASPI will be based on the closing share price on the third Friday of September and will become effective on the next trading day. 4.4 Quarterly Reviews Quarterly reviews are conducted in December, March, June. They involve a partial review of the index composition based on Vigeo ratings Changes due to ASPI scoring or involvement in exclusion criteria Changes in the ASPI scorings that could lead to a company s inclusion in or removal from the ASPI Eurozone are implemented at the first quarterly review meeting following the change(s). If the company is already included in the ASPI Eurozone : A company that is downgraded to zero / "0" (i.e. unconcerned ) under any of the six CSR domains is no longer eligible for inclusion in the ASPI Eurozone, given the ASPI s geometric average-based scoring system. It will be removed from the index at the next quarterly review. A company that becomes involved in the production or distribution of anti-personnel landmines or cluster munitions is no longer eligible for inclusion in the ASPI Eurozone and will be removed from the index at the next quarterly review. Any other changes to ASPI scorings will not lead to inclusions or exclusions before the next annual review. If the company is not already included within the ASPI Eurozone : Inclusion of new constituents are implemented at the next quarterly review, if the total number of constituent companies has fallen below Changes due to market changes Any company that has been removed from ASPI Eurozone since the last review as a result of market changes, and any company that is going to be removed at the following review of the reference index, is replaced by the next best ranked eligible company at the first quarterly review meeting following the change(s) Quarterly Review Dates The results of the quarterly reviews and any changes to the ASPI Eurozone s constituents (additions or deletions) will be announced on the first Friday of December, March and June. Implementation of any changes to the ASPI Eurozone will be based on the closing share price on the third Friday of December, March and June, and will become effective on the next trading day. 11 / 13

12 4.5 On-going Review and Maintenance On-going monitoring of companies within the ASPI Eurozone universe will allow for the incorporation of any scheduled or unscheduled changes (i.e. corporate changes and/or changes in the reference index), which occur between the scheduled annual or quarterly reviews Initial Public Offerings (IPOs) As companies are included within the ASPI Eurozone on the basis of the VIGEO rating, any company newly admitted to the reference index will become eligible to the ASPI Eurozone index at the first quarterly review following the release of its Vigeo ratings and ASPI scoring Spin-offs If a company is spun-off, it will become eligible at the first quarterly review following a complete Vigeo rating and ASPI scoring Mergers and Acquisitions Acquisitions: If a constituent of the ASPI Eurozone ( company A ) acquires another company ( company B ), it will remain included in the index with the ASPI score of company A. Mergers: If the largest constituent (by market capitalisation) of a merger ( company A ) is a constituent of the ASPI Eurozone, the newly merged company will be included in the index with the ASPI score of company A Changes to weightings The weighting of any component in the ASPI Eurozone follows the same rules as the reference index. Any changes to weighting(s) in the reference index will be implemented at the same time and in the same manner in the ASPI Eurozone (except for the application of the ASPI's 10% weigthing-cap rule). 12 / 13

13 5 DISSEMINATION OF THE INDEX 5.1 Introduction The ASPI Eurozone is disseminated via major data vendors, including Reuters, Bloomberg, Datastream and Fininfo. Index calculations including index weightings, adjustment coefficients, high, low, open and close values, and index performance are also sent on a daily basis by e- mail to index users. Region Curr. Type Short Name (Descr) ISIN Valor Alpha Code Calculation EURO EUR Price Advanced Sustainability (Price) CH AESE realtime 15 sec EURO EUR Return Advanced Sustainability (Return) CH AEST realtime 15 sec EURO US$ Price Advanced Sustainability $ (Price) CH AESK dayend EURO US$ Return Advanced Sustainability $ (Return) CH AESU dayend Companies included in the ASPI Eurozone and any changes to the ASPI Eurozone universe will be publicly disclosed and available to all interested parties on the Vigeo website at Index Dissemination Period The ASPI Eurozone is calculated and disseminated in EURO / every 15 seconds from 9.30 am CET to 5.30 p.m. CET using real time stock prices. At closing, the ASPI Eurozone is also calculated in USD / $ using opening and closing prices. 13 / 13