DJSI Korea - METHODOLOGY

Overview
Annual Review
Ongoing Review

Overview
The Dow Jones Sustainability Korea Index (DJSI Korea) is reviewed annually and quarterly to ensure that the index composition accurately represents the top 30% of the leading sustainability companies in each of the DJSI sectors within the DJSI Korea investable universe.

The annual review methodology selects these leading sustainability companies from the DJSI Korea investable stocks universe. The resulting changes to the index composition are announced on the annual review date in the first week of September and implemented - after the official closing prices have been determined - on the third Friday of September.

All these changes will be effective on the next trading day. The quarterly reviews reflect changes in the investable stocks universe as well as changes with regard to the number of shares, free float factors and – if applicable – free float cap factors.

Quarterly reviews are implemented on the third Friday in March, June, September, and December to become effective on the next trading day. Changes to the index are implemented after the official closing values have been established. All adjustments are made before the start of the next trading day. Constituent changes that result from the quarterly review will be announced at least two business days prior to the implementation date.

Annual Review
The annual review of the DJSI Korea is based on the DJSI Korea investable stocks universe which comprises the biggest 200 companies in as listed in the Dow Jones Global Total Stock Market Index.

The review process follows:

1. Sector Classification
2. Corporate Sustainability Assessment
3. Ranking within Sectors
4. Eligible Sectors
5. Eligible Companies
6. Component Selection

1. Sector Classification
The DJSI sector classification is based on the ICB industry, supersector, sector, and subsector classification. Each of the 200 companies in the DJSI Korea investable stocks universe is assigned – based on the company’s primary revenue source – to one of the DJSI sectors. The DJSI sectors – and their associated supersectors – are listed in the DJSI Guide Book.

2. Corporate Sustainability Assessment
All of the 200 companies in the DJSI Korea investable stocks universe are invited to take part in SAM’s corporate sustainability assessment. Each company assessed is assigned a corporate sustainability performance score.

3. Ranking within Sectors
The analysed companies are ranked according to their corporate sustainability score within their DJSI sectors.

4. Eligible Industry Groups
Only those DJSI sectors – where the highest ranked company globally has a corporate sustainability performance score of at least one-fifth of the maximum score – are eligible for the DJSI Korea. All other sectors – and their associated companies – are deemed ineligible and are eliminated from the review process.

5. Eligible Companies
From each eligible DJSI sector, only companies with a corporate sustainability performance score of at least half of the highest ranked company globally in the same sector are eligible for the DJSI Korea. All other companies are deemed ineligible and are eliminated from the review process.

6. Component Selection
The target selection for each eligible DJSI sector is 30% of the companies in the investable universe in that group. If the difference in the corporate sustainability performance scores between the last selected company in order to reach the target selection number of companies in each DJSI sector and the next company in the sustainability ranking order is within the specified average error margin, then this next ranked company is also selected for the DJSI Korea. The average error margin for the corporate sustainability performance assessment is determined by reviewing a random sample of companies among the upper half of the companies that were not selected because of relatively low corporate sustainability performance scores and the lower half of companies selected for the DJSI. The average error margin is reviewed annually.

 

Ongoing Review
In addition to the annual and quarterly reviews, the DJSI Korea is also continually reviewed for changes to the index composition necessitated by extraordinary corporate actions - e.g. mergers, takeovers, spin-offs, initial public offerings (IPOs), delistings and bankruptcy - affecting the component companies and their corporate sustainability performance.

DJSI Korea - FURTHER INFORMATION
COMPONENTS AND VALUES
METHODOLOGY
FACT SHEET