|
December 13, 2000
KLD Unveils Broadest Social Index
by Mark Thomsen
KLD marks its 10th anniversary with the launching of the Broad Market Social Index.
SocialFunds.com --
KLD & Co., Inc. (KLD) announced today the introduction of the Broad Market Social Index (BMSI), a
new index tool for social investors. The BMSI covers approximately 2300 companies, giving it the
broadest market coverage of any current social index.
 "The KLD BMSI is an important new tool for institutional
investors in that it will provide a different 'read' on the market than the DSI 400," stated KLD
Index Services Manager Zoe Van Schyndel. "The BMSI will satisfy the growing demand for indexes that
do more than just parallel the largest U.S. companies in the same style as the S&P 500."
The DSI 400, or the Domini Social Index 400, was launched by KLD ten years ago. It was modeled
after the Standard & Poor 500 Index (S&P 500), which is considered one of the major benchmarks for
measuring the U.S. economy. The S&P 500 is a market-capitalization index that focuses on the
largest publicly traded corporations.
The BMSI is modeled on the Russell 3000 Index, which
comprises the 3,000 largest U.S. securities as determined by total market capitalization. The
Russell 3000 represents approximately 98% of the investable U.S. equity market, which means it
includes not only large-cap companies, but mid- and smaller-cap firms as well.
The BMSI
thereby is designed to represent not only larger companies, but the market as a whole.
Additionally, since each stock is weighted by the proportion of its available equity capital, or
"float," the new index aims to reflect market realities.
In analyzing the Russell 3000
index, KLD found that approximately 2300 companies passed its social screens, which represents
about 90% of the market. The same exclusionary and qualitative screens used to determine the DSI
400 were applied in creating the new BMSI. Unlike the DSI 400, however, the number of companies in
the BMSI may vary over time.
KLD plans to reconstitute the index annually. It will follow
the reconstituting of the Russell 3000, which occurs every June.
KLD sees the BMSI as
being very flexible. "Out of the index, we expect a number of different types of products," says
Van Schyndel. "And those would be active mutual funds, exchange traded funds, or the index itself
could be segmented into a Russell 1000, a Russell 2000 or a Russell 3000 set," she added.
The index also has the potential to be sliced according to growth or value, depending upon
investors' needs, and additionally there could be an exclusionary segmentation of the index. For
example, an investor could compile an alcohol-free Russell 3000.
KLD has been a pioneer in
the socially responsible investing movement. The Boston-based corporate social research firm broke
new ground when it launched the DSI 400 in 1990. The DSI 400 has been an extremely valuable
benchmark in demonstrating that social investing does not necessarily connote lower returns. Over
its lifespan, the DSI 400 has outperformed the S&P 500, 536% to 453%.
KLD has indicated
that the introduction of this new index is part of a strategy to continue its leadership in the
social investing field. Peter Kinder, KLD co-founder and President, said "KLD defined 'social
research' for institutional investors and the BMSI is just the first of a series of new products
and services." KLD is now working on an international index that it plans to unveil in the second
quarter of 2001.
The creation of the BMSI is another sign of the maturing of social
investing. With the addition of new fund products based on the index, social investors will have
new options to diversify across large-, mid-, and small-cap companies. At the same time, the BMSI
may enable social investors to influence the corporate practices of a wider range of companies, and
profit from their financial performance.
www.kld.com
©
SRI World Group, Inc. All Rights Reserved.
Top
| 
