How is the Global 100 determined?
The Global 100 process begins each year on October 1, when the starting universe for the index is established. Companies in the starting universe are put through four screens, and the companies that emerge constitute the Global 100 Shortlist. Companies in the Shortlist are then scored on the priority key performance indicators (KPIs) for their particular GICS Industry Group. The top overall performers from each GICS Sector are named to the final Global 100, subject to the number of slots reserved for each GICS Sector.
What are the 12 KPIs used to evaluate companies in the Global 100?
How does a company make it into the starting universe?
The starting universe is set each year on October 1. All publicly-traded companies worldwide that have a market capitalization in excess of US$ 2 billion as of October 1 are automatically included in the starting universe.
What happens if a Global 100 company is delisted?
If a company that is part of the Global 100 index is delisted, its index position will be reinvested equally across the surviving index members. For instance, on February 4, 2014, Life Technologies Corp, a Global 100 company, was delisted from Nasdaq because it was acquired by Thermo Fisher Scientific. At the close of trading on Feburary 4, the stock was deleted from the Global 100 index and its weight was distributed equally to the surviving 99 index members.
What are the four screens that you use to reduce the starting universe to the Global 100 shortlist?
The four screens are summarized below:
1. Sustainability disclosure
The first screen eliminates companies that are not keeping pace with the sustainability reporting trends in their industry. Companies that fail to disclose at least 75% of the Priority KPIs for their respective GICS Industry Group are eliminated at this point in the project.
The F-Score, also known as the Piotroski F-Score, is a financial assessment that consists of nine individual tests. Companies have to pass at least five of these 9 to pass this screen.
3. Product category
Companies with a GICS Sub-Industry classification equal to “Tobacco” are eliminated. Companies with a GICS Sub-Industry classification equal to “Aerospace & Defence” are revenue-tested; if a company derives a majority of its revenue from its Defence business group (e.g. weapons manufacturing), it is eliminated.
The Sanctions screen looks at the dollar amount that companies have paid out in sustainability-related fines, penalties or settlements. If the total amount of a company’s fines, penalties and settlements as a percentage of total revenue during the previous 12 month period (from October 1) is found to be in the bottom quartile compared to GICS Industry Group peers, the company is removed from the Global 100.
What is a priority KPI?
A priority KPI is any of the 12 KPIs used in the Global 100 that is disclosed by at least 10% of all companies globally in a given GICS Industry Group. Click here to see the priority KPIs for each GICS Industry Group.
Why do you reserve slots for each GICS Sector in the Global 100?
Slots are reserved for each GICS Sector so that the industry composition of the Global 100 matches that of the Global 100’s financial benchmark, the MSCI All Country World Index (ACWI). Slots are reserved on the basis of each Sector’s contribution to the total market capitalization of the MSCI ACWI. For instance, if Energy companies were found to represent 10% of the total market capitalization of the MSCI ACWI, 10 slots would be reserved for companies in the GICS Energy sector. For more information on the MSCI ACWI, please click here.
How is the Global 100 different from other corporate sustainability rankings?
Unlike many other sustainability rankings, the Global 100 uses a clear set of key performance indicators (KPIs) to determine index constituents. The KPIs are informed by publicly available data, such that the index construction methodology of the Global 100 is fully replicable. Another defining feature of the Global 100 is its industry-specific focus; companies are only compared against their industry group peers.
How can you compare a bank to a mining company? Their operations are completely different.
The short answer: the Global 100 does not compare a bank to a mining company. A company’s performance is only compared against other GICS Industry Group peers. Therefore, banks are only assessed against other banks, and mining companies are only assessed against other mining companies.
Moreover, the Global 100 recognizes the fact that sustainability reporting practices differ among GICS Industry Groups. In order to address those differences, companies are only assessed on the priority KPIs in their respective GICS industry group.
Where do you get your data?
We collect most of our data from corporate sustainability reports, financial statements, MD&A disclosures and proxy statements. Data are collected through a combination of primary research and secondary research (Bloomberg).
How are the KPIs weighted?
KPIs are weighted evenly. For example, if there are 7 priority KPIs for the GICS Energy Sector, then each KPI will be assigned a weight of (100%/7 = 14%).
What happens if a company doesn’t disclose a data point?
It depends. If a company does not disclose a non-priority KPI, there is no bearing on its score. If a company does not disclose a priority KPI, it effectively receives a score of 0 for that KPI, thereby reducing the probability that it will qualify for the Global 100.
How does the Global 100 correspond with the GRI?
All 12 KPIs used in the Global 100 have corresponding GRI codes.
What year’s data is considered in your rankings?
The 2014 Global 100 uses 2012 performance year data.
Does the Global 100 methodology change from year to year?
Yes, the methodology is updated from year to year to reflect substantive changes in corporate reporting practices as well as new information and data about the financial materiality of all KPI-Industry Group match ups. We engage with various stakeholders, including the Global 100 Council of Experts, before making any changes to the Global 100 methodology.
Can I invest in the Global 100?
For more information about how to invest in the Global 100, please contact Corporate Knights at capital [@] corporateknights.com