How Indexing Works for Carbon Markets – Indexology® Weblog

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How Indexing Works for Carbon Markets

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How are modern indices monitoring compliance and voluntary carbon futures markets bringing larger transparency to the vitality transition? S&P DJI’s Jim Wiederhold and KraneShares’ Luke Oliver focus on how first-to-market benchmarks are democratizing entry to world carbon markets.

The posts on this weblog are opinions, not recommendation. Please learn our Disclaimers.

Exploring Lively vs. Passive in Latin America

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How do lively managers in Latin America stack as much as their benchmarks? Uncover the important thing takeaways from the most recent SPIVA Latin America Scorecard with S&P DJI’s Tim Edwards and Ericka Alcántara.

The posts on this weblog are opinions, not recommendation. Please learn our Disclaimers.

S&P ESG Excessive Yield Dividend Aristocrats Index – Including a Layer of Sustainability through ESG Screening

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Excessive-dividend-yielding shares have been prevalent in 2022, as rising rates of interest have put downward strain on lengthy period property. On the similar time, market contributors are more and more looking for to align investments with their private and societal values. The S&P ESG Excessive Yield Dividend Aristocrats® Index could also be a technique that checks each of those bins. Launched in March 2021, this index strives to attain low monitoring error and comparable dividend yield to the S&P Excessive Yield Dividend Aristocrats Index whereas incorporating significant ESG enchancment.

Combining Dividend Aristocrats and ESG Methodology

The S&P ESG Excessive Yield Dividend Aristocrats Index combines the S&P Dividend Aristocrats methodology with a sustainability overlay. To qualify for the index, an organization should first have constantly elevated dividends yearly for at the least 20 years. This preliminary filter tilts the index towards deciding on higher-quality firms, for the reason that means to constantly develop dividends over an extended time frame might be a sign of economic energy, self-discipline and sturdy incomes energy.

Subsequent, a number of ESG screens are utilized. The index excludes firms within the lowest quartile of S&P DJI ESG Scores. Extra ESG exclusion critiques are performed quarterly primarily based on enterprise actions, in addition to United Nations International Compact (UNGC) breaches. These ESG screens serve to reinforce the already stringent {qualifications} of the Dividend Aristocrats methodology.


Since January 2011, the S&P ESG Excessive Yield Dividend Aristocrats Index has generated a 12.92% annualized return versus 11.87% for the S&P 1500TM, whereas exhibiting much less volatility.

Lately, the outperformance of the S&P ESG Excessive Yield Dividend Aristocrats Index versus the S&P 1500 has been much more pronounced. 12 months-to-date, the S&P ESG Excessive Yield Dividend Aristocrats Index has outperformed the benchmark by 15.25%. One purpose for that is that high-yielding indices, primarily by means of their decrease durations, supplied larger safety towards quickly rising rates of interest in comparison with the benchmark.

Comparability of S&P DJI ESG Scores and Dividend Yields

Exhibit 3 reveals that the S&P ESG Excessive Yield Dividend Aristocrats Index supplied notable S&P DJI ESG Rating enchancment over the S&P Excessive Yield Dividend Aristocrats Index. The S&P DJI ESG Rating improved by 11 factors per 12 months on common, revealing an annual improve of over 20%.

The S&P ESG Excessive Yield Dividend Aristocrats Index and S&P Excessive Yield Dividend Aristocrats Index have had comparable yields traditionally, and each have held a major yield benefit over the S&P 1500 (see Exhibit 4). Over the interval examined, the common annual dividend yields for the S&P ESG Excessive Yield Dividend Aristocrats Index, S&P Excessive Yield Dividend Aristocrats Index and S&P 1500 have been 2.73%, 2.88% and 1.84%, respectively.

Exhibit 5 reveals the common year-over-year annual proportion dividend progress charge for present S&P ESG Excessive Yield Dividend Aristocrats Index constituents. The common year-over-year dividend progress charge over the previous 20 years was 11.26%, far surpassing the common year-over-year U.S. CPI charge of two.35% over the identical interval.


For market contributors who’re on the lookout for high-quality firms that align with their private values, in addition to a historical past of secure and enticing dividend funds, the S&P ESG Excessive Yield Dividend Aristocrats Index could also be an possibility to contemplate.

The posts on this weblog are opinions, not recommendation. Please learn our Disclaimers.

Diversification Past Borders

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Educational theorists typically assert the choice of the place to take a position as extra vital than the choice of what to take a position in. Research counsel that as much as 90% of funding returns are attributable to location.

Regional fairness indices characterize totally different combos of geographic and sector publicity. These variations can doubtlessly enhance the diversification advantages out there when combining indices. We examine the underlying sector and geographical income exposures of two S&P DJI regional indices and present that using combos of fairness indices might enhance an investor’s threat/return potential, in addition to cut back house bias (an anomaly whereby asset allocators chubby their home inventory market).

What Is the S&P 500®?

Extensively thought of the first gauge of the U.S. large-cap inventory market, the S&P 500 is a float-adjusted, market-capitalization-weighted index that displays 500 of the biggest, most well-known firms domiciled within the U.S. The index incorporates a spread of inclusion standards, together with a profitability display. The S&P 500 represents over 80% of the full U.S. market capitalization as measured by the S&P Whole Market Index (TMI). Most of the index’s constituents have a serious world presence, with revenues generated in a variety of overseas nations. Due to this fact, regardless of its U.S. focus, the S&P 500 supplies perception into firms with a various income base throughout geographies and sectors.

Europe versus the U.S. – Variations in Publicity

The S&P Europe 350® is a European-centric counterpart to the S&P 500. The index focuses on the biggest blue-chip firms domiciled in 16 European nations, weighted by float-adjusted market capitalization primarily based on a spread of inclusion standards.

We use FactSet Geographic Income Publicity (GeoRev™) knowledge, adjusted for sales-weighted publicity, to grasp the geographic unfold of constituent revenues for each the S&P 500 and the S&P Europe 350. For instance, firms within the S&P 500 generate round 70% of their income within the U.S., whereas firms inside the S&P Europe 350 generate solely 24% of their income from the identical location.

Exhibit 1 compares the S&P 500 and the S&P Europe 350. It reveals that the revenues of the S&P Europe 350 have a larger tilt away from the U.S. and towards Europe than the S&P 500. Due to this fact, a technique combining the 2 indices might result in a extra various geographic income publicity.

In follow, industries aren’t distributed evenly throughout geographies. Exhibit 2 reveals that the S&P Europe 350 has vital weight in Industrials and Well being Care, reflecting the sturdy franchises in these sectors in nations similar to Germany and France for Industrials and the U.Okay. for Well being Care. The S&P 500 has a better weight in Info Know-how and Communication Companies than the European index.

Exhibit 3 supplies the annualized whole return and the return/threat ratios for numerous hypothetical combos of the S&P 500 and the S&P Europe 350 over totally different intervals ending in September 2022. Exhibit 4 attracts the environment friendly frontier for various combos of S&P Europe 350 and S&P 500 allocations. The outcomes present that over longer time intervals, a hypothetical mixture of European and U.S. indices supplied a better return and extra favorable threat profile than the S&P Europe 350 funding alone, maybe reflecting the advantages of diversification.


The posts on this weblog are opinions, not recommendation. Please learn our Disclaimers.

Commodities Challenged by Slowing International Development in November

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Fiona Boal

Head of Commodities and Actual Property

S&P Dow Jones Indices

Commodities, represented by the broad-based S&P GSCI, fell 1.7% in November on the again of weak spot within the petroleum and grains complexes. International commodities markets have been significantly hit this month by worries over uncommon demonstrations in China towards COVID-19 curbs, with oil and grains falling to multi-month lows and safe-haven gold rising. After 11 months, the S&P GSCI was up 27.8% YTD, defying larger rates of interest and rising fears of a protracted world financial slowdown.

The S&P GSCI All Crude has misplaced over a 3rd of its worth since peaking in early March (and giving up all good points following the Russia-Ukraine battle); it may be mentioned that oil costs are nodding in settlement with Treasury yields concerning an approaching financial slowdown. Within the petroleum complicated, a comparatively tight world provide image is competing with fears of an financial slowdown, a powerful U.S. greenback, authorities intervention to deal with skyrocketing retail vitality costs and indicators that vitality shoppers have taken steps to restrict consumption. A drop in monetary market participation within the main oil by-product markets has contributed to larger ranges of volatility. Market contributors can be eagerly awaiting a choice from EU member nations concerning a value cap on Russian oil in early December, in addition to the Dec. 4, 2022, OPEC+ assembly to offer additional market path.

The S&P GSCI Grains declined 4.3% in November. Within the wheat market, low-cost provides from Russia and elsewhere within the Black Sea area have stored a lid on costs. In distinction, soybeans have been supported by sturdy onshore soymeal demand in China. Argentina’s resolution to provide a brief alternate charge for soy exporters till the top of the 12 months will seemingly encourage a surge of exports in December. The S&P GSCI Cotton rose 20.4% in November however remained greater than 50% off its Might excessive. As attire gross sales contract, the collapse in cotton costs has been attributed to weaker Chinese language demand for cotton yarn, in what might be an indication that core inflation has began to wane. The S&P GSCI Livestock was unchanged over the month.

Industrial metals have up to now averted the malaise brought on by Chinese language unrest, and expectations of a worldwide slowdown as an alternative targeted on steps introduced by China geared toward bailing out its struggling actual property sector. The S&P GSCI Industrial Metals rose 12.2% over the month, whereas nickel rallied 23.9%.

The S&P GSCI Gold gained 6.8% in November, ending a seven-month shedding streak. Indicators that the U.S. Fed might cut back the tempo of its rate of interest hikes, together with the continued failures within the cryptocurrency ecosystem, helped assist the so-called safe-haven asset.

To study extra in regards to the S&P GSCI and associated indices, try our Commodities Theme Web page.

The posts on this weblog are opinions, not recommendation. Please learn our Disclaimers.

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