NSE arm India Index Services & Products Ltd (IISL) today launched two indices to capture the environmental and social governance score of Nifty 100 companies.
The Nifty100 ESG Index and Nifty100 Enhanced ESG Index will cater to the benchmarking need and are also expected to be reference indices for passive investments in the form of Exchange Traded Funds (ETFs), index funds and structured products.
The indices would constitute companies that have a normalised ESG ( Environmental, Social and Governance) score of at least 50 per cent and would exclude firms engaged in the business of tobacco, alcohol, controversial weapons and gambling operations, IISL said in a statement.
Besides, companies that are involved in any major environmental, social or governance controversy are also not considered for selection in the index.
The weight of constituents in these indices are tilted based on ESG score assigned to the company, ie the constituent weight is derived from its free float market capitalisation and ESG score.
"ESG based investment strategy has gained popularity across global investors. The underlying principle behind ESG based investing lies in capturing the intangible values of environment friendly, socially responsible firms with robust governance policies in place. The two new ESG indices are expected to strongly appeal to the investment community looking to align their portfolios with the ESG theme," IISL chief executive Mukesh Agarwal said.
The base date for the indices is April 1, 2011 and base value is 1000. The index composition is reconstituted on a semi-annual basis.
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