NEW YORK (September 20, 2022) — ISS ESG, the responsible investment arm of Institutional Shareholder Services Inc. (ISS), today announced the launch of a new proprietary Freshwater Index Series to enable investors to address freshwater risk while maintaining alignment with traditional ESG standards. The index series currently has two focus regions – emerging and developed markets, and is launched at a time of unprecedented pressure on freshwater resources due to climate change including record temperatures in many regions as well as severe droughts and floods, which pose an economic risk for the business community and its investors.
The methodology for the index series leverages the proprietary ISS ESG Water Risk Rating (WRR), launched earlier this year, which is the aggregated score of a company’s Water Risk Exposure Classification and its Water Risk Management. The Water Risk Exposure Classification consists of a company’s individual exposure to freshwater-related risks based on its industry assignment, the geographical footprint of its own operations, and its industry classification regarding supply chain risks. The Water Risk Management assessment is a metric for a company’s current water-related operational performance, taking into account its risk management practices along the value chain, as well as its potential involvement in relevant controversies.
Potential index constituents are drawn from the Solactive GBS Emerging Markets Large & Mid Cap Index and Solactive GBS Developed Markets Large & Mid Cap Index, respectively, and only issuers with a rating of low to negligible risk, i.e. a WRR score of 50 and above, are eligible. Further, ISS ESG screens are applied to remove prospective constituents with “Red” Norm Based Research flags, “Red” Controversial Weapons flags, and those with an overall ISS ESG Corporate Rating of D+ or less. The indexes are market cap weighted and rebalanced quarterly. Sector leading companies within the new Freshwater Index Series currently include Dentsu Group Inc., DNB Bank ASA, Infosys Ltd., Sysco Corp, Quanta Computer, and WW Grainger Inc., among many others.
“The Freshwater Index Series is the latest example of ISS ESG bringing to market innovative and differentiated index offerings, drawing on our deep well of industry leading sustainability ratings and research, and high quality extra-financial data,” said Dr. Maximilian Horster, Head of ISS ESG. “As a leader in the responsible investment space, clients can count on ISS ESG to deliver best-in-class solutions and services that are supported by our highly talented team of more than 500 professionals located across global financial centers.”
“According to our look-back analysis, Developed and Emerging Market Freshwater indices would have outperformed their benchmarks since year-end 2017,” added Hernando Cortina, Head of Index Strategy at ISS ESG. “Reducing freshwater risk may show a financial case, particularly in emerging markets.”
Index methodologies are available on the ISS website and that of the Index Administrator, Solactive AG, an authorized benchmark administrator under European Benchmarks Regulation (BMR). Index values may be obtained using the following identifiers: ISSWREMT, and ISSWRDMT.
To learn more about ISS ESG’s index offerings, please click here.
About ISS ESG
ISS ESG solutions enable investors to develop and integrate responsible investing policies and practices, engage on responsible investment issues, and monitor portfolio company practices through screening solutions. It also provides climate data, analytics, and advisory services to help financial market participants understand, measure, and act on climate-related risks across all asset classes. In addition, ESG solutions cover corporate and country ESG research and ratings enabling its clients to identify material social and environmental risks and opportunities. For more information, please visit us at: www.iss-esg.com
Executive Director, ISS