First-of-its-Kind Diversity Index to Integrate Ethnicity Alongside Gender for U.S. Company Directors and Executives
NEW YORK (October 20, 2020) — ISS ESG, the responsible investment arm of Institutional Shareholder Services Inc. (ISS), today announced the launch of a proprietary ISS ESG U.S. Diversity Index as well as ISS ESG Governance QualityScore (GQS) Index family.
These innovative investable equity indices, based on differentiated and robust ISS ESG data, are now active and can be licensed for the creation of passive financial investment products or for benchmarking. Underpinned by ISS’ deep well of boardroom and governance data, the indices integrate detailed datasets available for U.S. directors and executives and a robust methodology for assessing governance practices and risks, globally.
“In keeping with our commitment to deliver to clients cutting-edge and timely responsible investment solutions, we are pleased to break new ground with today’s launch of the first, proprietary ISS ESG indices with the promise of more to come,” said Marija Kramer, Head of ISS ESG.
The ISS ESG U.S. Diversity Index is the first to select constituents exhibiting both broad ethnic and gender representation for board directors and named executive officers (NEOs). Minimum requirements include a combined minimum of three distinct ethnically diverse individuals and three distinct women among directors or NEOs, as well as a 35 percent combined minimum of women or ethnically diverse directors. Small-, middle-, and large-capitalization U.S. companies are selected from the ISS ESG Director & Executive Diversity dataset. An analysis of data underlying the ISS ESG U.S. Diversity Index finds significant change over recent years with 251 companies meeting these index requirements compared with only 147 three years ago.
The ISS ESG Governance QualityScore Index family, meanwhile, is a set of sector-neutral indices of well-governed companies and those deemed to be responsible market participants based on their ISS ESG GQS score as well as assessments based on ISS ESG’s Norms and Controversial Weapons Research. The indices are available for the U.S., European, and Asia-Pacific (ex-Japan) markets. The family of indices is designed to help investors identify large and middle-capitalization companies with strong board structure, compensation, shareholder rights, and audit and risk oversight practices, as well as those aligned with U.N. Global Compact principles. Leveraging ISS’ long-standing and deep governance expertise, the underlying GQS methodology focuses on the qualitative aspects of governance, including global governance standards. Notably, back-testing of the ISS ESG Governance QualityScore Index family shows enhanced risk-return attributes compared with their parent universe.
“This pioneering family of indices fill an important gap in the current index landscape and supports the investment-case for companies with robust governance and diversity practices” said Hernando Cortina, Head of Index Strategy at ISS ESG.
Index methodologies are available on the website of the Index Administrator, Solactive AG, an authorized benchmark administrator under European Benchmarks Regulation (BMR). Index values may be obtained using the following identifiers: RICs: .ISSDIVUT, .ISSGQSUT, .ISSGQSET, .ISSGQSPT; Bloomberg: ISSDIVUT, ISSGQSUT, ISSGQSET, .ISSGQSPT <INDEX>.
To learn more about ISS ESG’s index offerings, please click here.