For my undergraduate thesis, I wrote about the Dow Jones Sustainability Index (DJSI). The DJSI plays a very important role in evaluating sustainability from a financial market standpoint.
The DJSI is an index that Dow Jones and SAM Group, a rating agency for social responsibility investment, established in 1999 as the first index based on SAM’s social responsibility investment criteria. SAM Group analyzes the largest 2,500 companies in the Dow Jones Global Total Stock Market Index, and then selects 10% of those companies to be components of the DJSI. The DJSI was adopted as a benchmark by asset management companies in 16 countries, whose total assets currently amount to $6 billion.
SAM Group evaluates the companies based on three criteria: economic, environmental, and social sustainability.
Source: Dow Jones Sustainability Index
Below is a chart that shows the DJSI’s performance since its launch in 1999. When compared to the Dow Jones Industrial Average (DJIA) and S&P 500, its superior performance can be seen. After 2005 the DJSI exceeded its benchmarks (DJIA and S&P500). What’s more, the DJSI has been resilient in the market crunch in 2009. These phenomena, I think, represent the long-term superiority of sustainable companies. I believe the DJSI’s performance shows that social and ecological sustainability is consistent with economic sustainability.
In addition, I think there is a positive feedback loop for the DJSI’s superior performance that is supported by the financial market.
Corporations are increasingly motivated to be selected as composites of the DJSI. Here I have linked to comments by DJSI component companies PepsiCo and Novartis.
The DJSI is a fantastic measure of the sustainability performances of listed companies. But the DJSI cannot evaluate unlisted companies; therefore, we need other indicators to evaluate the sustainability of those companies.
-Koji Omiya
Tags: sustainable design
It is a long term view to do the right thing.
This was a very interesting read!