Monitoring of Index Members and Exclusion Process

Once a company is selected as a member of the Dow Jones Sustainability Index family, it is monitored daily with regard to newly arising critical issues. The objective of the monitoring process is to verify a company's involvement and management of critical environmental, economic and social issues or crisis situations that can have a highly damaging effect on its reputation and hence cause a reduction of the total sustainability score which ultimately determines a company’s inclusion in the index family.

The monitoring process comprises an assessment of a company's involvement in economic, environmental or social crisis situations and compares its crisis management against its stated principles and policies. The monitoring process can lead to a company's exclusion from the index family regardless of how well it performed in the last SAM Corporate Sustainability Assessment.

The following issues are identified and reviewed in the monitoring process:

• Commercial practices: e.g., tax fraud, money laundering, antitrust, balance sheet fraud, and corruption cases.
• Human rights abuses: e.g., cases involving discrimination, forced resettlements, child labor and discrimination of indigenous people.
• Layoffs or workforce conflicts: e.g., extensive layoffs and strikes.
• Catastrophic events or accidents: e.g., fatalities, workplace safety issues, technical failures, ecological disasters and product recalls.

The daily monitoring of index members is based on media reviews using RepRisk’s monitoring tool.

If a critical issue occurs, the responsible SAM Analyst starts assessing the extent of the crisis within the company, geographically and in terms of media coverage. If the impact of the crisis on the reputation of the company and its core business is far reaching, covered worldwide in the media or is an important concern for the company, the monitoring moves to the next phase.

In a second step, the analysts verify the quality of a company's crisis management. They assess how well the company informs the public, acknowledges responsibility, provides relief measures, involves relevant stakeholders and develops solutions.

The SAM Analysts then weigh the severity of the crisis in relation to the company's crisis management and, if deemed appropriate, provides the DJSI Index Design Committee with a proposal to exclude the company from the index family.

The DJSI Index Design Committee reviews the corporate sustainability monitoring results in line with the company's track record as well as its political and cultural setting. If the crisis management of an important issue is considered poor from a sustainability point of view, the DJSI Index Design Committee can decide, after a thorough analysis to exclude the company from the Dow Jones Sustainability Indexes.
SAM informs the affected companies about their exclusion. The information on excluded companies is communicated through the Dow Jones Sustainability Indexes website only. The implementation of changes in the composition of the affected indexes is made effective with the following quarterly rebalancing. It is to the sole discretion of the DJSI Design Committee to overrule the date of implementation.