August 24, 2009
KLD's Sustainability Indexes Are Rebranded as a Result of Partnership with FTSE
by Robert Kropp
Rebranded indexes include the Domini 400 Social Index, the first index to employ ESG factors, which
is now named the FTSE KLD 400 Social Index.
As the result of a strategic partnership with FTSE
Group, first announced in October, 2008, the family of 16 indexes developed by KLD Research & Analytics has been rebranded as FTSE
KLD's indexes were designed to facilitate the
integration of environmental, social, and governance (ESG) factors into the investment process.
They include the former Domini 400 Social Index, launched in 1990, which was the first benchmark
index to use ESG factors. The Domini 400 Social Index has been rebranded as the FTSE KLD 400 Social
In constructing the FTSE KLD 400 Social Index, KLD has maintained a composition of
250 FTSE All World USA companies, 100 additional large- and mid-cap companies chosen for sector
diversification, and 50 smaller companies with superior ESG performance.
For the Index,
KLD has employed negative screening to exclude companies "involved beyond specific thresholds in
alcohol, tobacco, firearms, gambling, nuclear power, and military weapons." KLD also uses financial
screens that measure market capitalization, earnings, liquidity, stock price, and debt to equity
According to KLD, it "selects companies for the KLD400 that have positive social
and environmental records based on the following issues: community relations, diversity, employee
relations, human rights, and product quality and safety, environment and corporate governance."
The rebranded family of Indexes will be calculated, distributed and licensed by FTSE,
which has created and managed over 120,000 equity, bond, and alternative asset class indexes. KLD
will continue to manage all FTSE KLD indexes, performing the ESG research, maintaining the index
rules and making company selections.
In 2007, FTSE entered into a strategic partnership
with Impax Asset Management, which led to the
launch of the FTSE Environmental Technology (FTSE ET50) Index and strengthened FTSE's presence in
European sustainability indexes.
Following its strategic partnership with KLD, FTSE's
presence in US-based sustainability indexes will be strengthened.
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