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Corporate Monitor Sustainability Dividend Index

Corporate Monitor has developed a Sustainability Dividend Index (SDI) which measures the ethical merit of a fund based on the Environment, Social and Governance performance of the companies in which the fund invests.

The first step in determining the SDI score for a fund is to calculate the weighted average Corporate Monitor SRI Ratings for Environment, Social and Governance of all the fund's company holdings. We rate companies within our Corporate Monitor universe using the 5 star rating system for their Environment, Social and Governance (ESG) performance. A three star rating should be considered an acceptable level of performance in each area. An interpretation of each rating is as follows: -

Sustainability Dividend Index
Company Ratings

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Rating
Environment
Social
Governance
*
**
***
****
***** 		Adverse
Developing
Compliant
Sustainable
Best Practice 		Adverse
Disengaged
Responsive
Engaged
Best Practice 		Questionable
Patchy
Compliant
Proactive
Best Practice
 
 
 
From individual ratings a weighted average SRI Company Rating is determined for the fund for Environment, Social and Governance. This takes into account the percentage of the fund portfolio made up by individual companies. This number ranges from 1-5.

The portfolio sustainability score (SDI) combines a weightage of 45% for Environment, 30% for Social and 25% for Governance. It is shown as a score between 0 and 100. Zero equals the SDI of a notional portfolio of the 20 S&P/ASX200 stocks with the worst SRI Company Ratings. A score of 100 equals the SDI of 20 S&P/ASX200 stocks with the best ratings.

At 30th April, 2002, the SDI score of the S&P/ASX200 was 62. This demonstrates that larger companies have slightly higher SRI ratings. Prior analysis has also shown that most SRI funds have a SDI score comfortably above the S&P/ASX200.

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