DJSI WORLD - METHODOLOGY

Overview
Annual Review
Ongoing Review

Overview
The DJSI World is reviewed annually and quarterly to ensure that the index composition accurately represents the top 10% of the leading sustainability companies in each of the DJSI sectors. The annual review methodology selects the leading sustainability companies from the investable stocks universe, which is also reviewed annually. The resulting changes to the index composition are announced on the annual review date in 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.

Annual Review
The annual review of the DJSI World index is based on the DJSI World investable stocks universe.

The review process follows:

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

1. Sector Classification
The DJSI World sector classification is based on the ICB industry, supersector, sector, and subsector classification.
All the companies in the DJSI World investable stocks universe are assigned - based on the company’s primary revenue source - to one of the 58 DJSI sectors.

These sectors facilitate meaningful comparisons of corporate sustainability performance because they are appropriately structured to capture the sustainability characteristics of specific industries. This is achieved by grouping companies with sources of major revenue, which respond similarly to economic, environmental and social dimensions.

The DJSI sectors - and their associated supersectors - are listed in the DJSI World Guide Book.

2. Corporate Sustainability Assessment
All the 2,500 companies in the DJSI World investable stocks universe are invited to take part in SAM’s corporate sustainability assessment. Each company assessed is assigned a corporate sustainability performance score. For further details about the assessment please click here.

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 has a corporate sustainability score of at least one-fifth of the maximum score are eligible for the DJSI World.
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 score of at least half of the highest ranked company in the same sector are eligible for the DJSI World. All other companies are deemed ineligible and are eliminated from the selection process.

6. Component Selection
The target selection for each eligible DJSI sector is 10% of the companies in the investable universe in that group. In a first step, the top 7% of the eligible companies in each sector – by corporate sustainability performance ranking – are selected for the DJSI World. In a second step, the eligible current DJSI World component companies ranked in the buffer zone between the top 7% and the top 13% of the eligible companies – by corporate sustainability performance ranking – are selected for the DJSI World. If after adding all component companies in the buffer zone the target selection number is not reached, then additional non-component companies – in their corporate sustainability ranking order – are added to the selection universe, but only until the target selection number of companies is reached. If the difference in the corporate sustainability 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 World. 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 scores and the lower half of companies selected for the DJSI. The average error margin is reviewed annually.

7. Market Capitalization Coverage
The target free float market capitalization coverage for each DJ supersector is 20% of the DJGI market capitalization for that supersector.
For each supersector, if the cumulative market capitalization of the selected companies exceeds this target, then no further companies from this supersector are selected for the DJSI World.
If the market capitalization target is not yet exceeded, then further companies from this supersector are selected for the DJSI World – according to their sustainability ranking order – until the cumulative market capitalization is as close as possible to the market capitalization target. Only companies that belong to the top 13% in their DJSI sector are eligible for inclusion. Selection priority is given to companies that have a higher percentage of the best company’s score in their DJSI sector. Finally, further components may be added from the list of eligible companies – according to their sustainability ranking order – to reduce gaps between the regional and sectoral allocation of the DJSI World and the overall regional and sectoral distribution of the DJGI.

Ongoing Review
In addition to the annual and quarterly reviews, the DJSI World 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.