ISS ESG has launched the EVA Leaders Index Series to help investors integrate ESG criteria across leading global companies.
The index series identifies sector-leading companies using economic profit as measured by a company’s Economic Value Added (EVA) margin. Constituent equities must receive a medium or high ISS ESG Corporate Rating and comply with standards regarding international norms and controversial weapons in order to be eligible.
The index methodology follows a four-step process and screens constituents of the Solactive Global Benchmark Series. ISS ESG screens are applied to remove prospective constituents with Red Norm Based Research flags, Red Controversial Weapons flags, and those with an overall ISS ESG Corporate Rating of D-, D, and D+. The EVA screen is applied to remove prospective constituents with a negative EVA margin and, lastly, qualifying constituents are added by sector, based on descending EVA margin until reaching a market cap threshold and targeting sector neutrality. Indexes are market cap weighted after the above steps and rebalanced quarterly.
Sector-leading companies within the new EVA Leaders Index Series currently include Apple, Air Liquide, JPMorgan Chase, TC Energy, Procter & Gamble, and American Tower Corp., among others. Initial coverage spans three regions including the U.S., Europe, and developed markets.