Ethos Foundation, a Swiss pension fund organisation promoting socially responsible investment (SRI), has launched a corporate governance index on the country’s main stock exchange.
The new equities index, the Ethos Swiss Corporate Governance Index (ESCGI), weights constituents according to corporate governance best practice criteria, while also taking into account companies’ carbon emissions.
It is described as the first index of this type on the Swiss stock market, the SIX Swiss Exchange.
The index takes the companies that make up the classic Swiss equity market index, the Swiss Performance Index (SPI), and applies Ethos’ corporate governance principles and criteria to modify the weighting of the companies.
“The innovative methodology of this index allows mitigation of the risks of poor corporate governance that are ignored by the classic indices,” said Ethos CEO Vincent Kaufmann. “This provides investors with a better protection from corporate governance risks.”
SIX Swiss Exchange is calculating the index on behalf of Ethos.
According to the foundation, the index aims to:
- Reduce corporate governance risks by underweighting or excluding companies that do not apply best practices;
- Reduce the carbon impact of the index by underweighting companies with significant carbon emissions;
- Avoid overweighting companies involved in serious controversy;
- Avoid overweighting companies that make up more than 15% of the SPI;
- Overweight companies that do not fall into one of the above categories.
Multiple share classes, combined chairman/CEO roles, and variable pay making up a large part of executive remuneration are among features that will weigh negatively on a company’s inclusion in the index.
The new index is being used as the benchmark for the Ethos Equities CH Indexed Corporate Governance fund, managed by Pictet Asset Management.