Dow Jones Sustainability Index: Integrate sustainability in your investment decisions

Investing in sustainable businesses using DJSI

There are many ways of identifying successful and high-performing companies. Benchmark indexes like the S&P 5000 have been used by funds looking to attract investors looking for low-cost investments.

However, these indexes do not often consider the sustainability of a business while doing their analysis. And to the more conscious investors of today who wish to invest in businesses that are not only successful but also sustainable, this presents a bit of a challenge.

Investors would have to spend a considerable amount of time looking into the annual reports of businesses they wish to invest in, to find sustainability information. This can easily become a painstaking process, as most businesses have only just begun to integrate sustainability reporting into their annual reporting process.

And it is in this context, that we see a need for the average sustainability-conscious private investor to have an easier way of identifying sustainable businesses to invest in. 

The Dow Jones Sustainability Index (DJSI) solves this exact issue.

Why was the DJSI created?

The DJSI was created jointly by the S&P Dow Jones Indices and SAM to simplify the identification of sustainable businesses for investors. 

While there are several other indices that solely consider a company’s financial performance, their usage is becoming increasingly limited now. Among investors and experts, there is an increased understanding and acceptance that sustainability information, especially if they are found to be financially material, need to be considered while making investment decisions.

With new regulations being put into effect seemingly every passing day, there are serious financial risks associated with not being a sustainable business.

And the DJSI, with its identification of the most sustainable businesses, helps investors avoid these risks. The indices serve investors who wish to integrate sustainability considerations into their investment decisions while building their portfolios, by providing a benchmark.

Which companies are represented in the DJSI?

The DJSI has different families, such as DJSI World, DJSI North America, DJSI Emerging Markets, among others. They also present opportunities for investors to limit their involvement in controversial activities such as alcohol and tobacco through exclusion criteria.

Primarily, DJSI World represents the top 10% most ESG compliant companies among the biggest 2500 companies in the S&P Global Broad Market Index. This includes large, renowned companies like Alphabet Inc and Microsoft Corp. 

The DJSI presents the most sustainable companies among the world’s largest businesses. This helps investors identify which of these successful companies are sustainable and which of them carry risks associated with not being sustainable.

 And this is also its primary downside. It only takes into consideration the largest companies. For investors who are looking at smaller businesses that are likely to see more growth, the DJSI is not a particularly useful tool. For these investors, they are left relying on other, more complicated methods of identifying sustainable businesses. 

Making your business sustainable

Most of the businesses that feature in the DJSI are likely to have dedicated departments and teams to drive their sustainability efforts. With their vast resources, they will have optimised the sustainability integration into their business as well as the communication of their sustainability efforts.

But most businesses do not have the kind of resources that these businesses do. Small and Medium-sized businesses do not have the luxury of spending large amounts to make their activities sustainable.

For them, sustainability makes sense only if it does not cost an astronomical amount.

And this is people like us at SUSTINARO come in. With our focus on sustainability communication that goes beyond traditional marketing and extends to strategic areas like reporting the sustainability data, we ensure that sustainability makes sense for your business. 

Connect with us today, and take your first step towards becoming a sustainable business.