dow jones indexing, islamic sustainability
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Indexing Strategies
Conference
Islamic Sustainability
Anthony Yeung
Regional Director, Asia
November 27-28, 2007
Islamic Finance & Ethics = Common Shared
Values� Fairness?
-Merger of Faith & Finance +++
-Prohibitions oriented Industry
-Social-Ethical Movement
-Economic Development & Higher Incomes ����
+Secularization or Social Conscious?
-Greening of Islamic Finance
Presentation Overview
-Islamic Screens
-Ethical to Sustainable
-DJIM Sustainability Index
-Conclusion
Islamic Screens
-Negative Covenants
-Prohibitions Oriented Industry
-Negative screens
+Primary Business
+Financial Ratios
-Dow Jones Islamic Market indexes
-AAOIFI
Islamic v. SRI Screening
Exclusions
> Tolerance Parameters
• Impermissible income
• Community benefits
> Primary Business
• Sin sectors
> Financial Ratios
> Reviews
> Scholars
> Purification
• Dividends
> Turnover
• Financial Screen
Inclusions> Economic sectors
• HCR, TECH,
> Stakeholders• Employee, Vendors
> Primary Business• Env, Labor, BoD, Diversity
> Revenue Donation> Bylaws/Prospectus> Turnover
• Mgmt,policies, acts
> Advisory Boards
IF: Beyond Ethical to Sustainable
-Plus Positive Screens
-Bridge of Commonality Language
-Path towards Governance
-Resulting in PR/Mkting Benefits
-Boycotts and ethical
motivation
-Exclusion of industry groups
-Focus on a narrow selection
of social and
-Environmental crietria
EthicalInvestments
Sustainability Investments
-Adding shareholder value
-Future-driven
-Best of class and
industry-specific
-Integrating economic,
environmental and
social criteria
Market Developments (I)From Ethical to Sustainability Investments...
%
Total IndustryCriteria
GeneralCriteria
SocialDimension
EnvironmentalDimension
EconomicDimension
50%33%
20%
100%
50%
33%
33%
DJ Sustainability World Index –
Criteria
Average sustainability scores for selected criteria
DJSI members and non-members
0 10 20 30 40 50 60 70 80 90 100
Corporate Governance
Codes of Conduct / Compliance /
Anti-Corruption & Bribery
Risk & Crisis Management
Eco-Efficiency
Labor Practice Indicators
Human Capital Development
Sustainability and Project Finance
(Banks)
Protection of Biodiversity (Oil &
Gas)
Healthy Living (Food)
Access to Drugs (Drugs)
DJSI Members Non-Members
DJ Sustainability World Index –
Scores
DJ Islamic Market Sustainability Index – Construction
Dow Jones Global Index
Dow Jones Sustainability World Index
(309 components)
Dow Jones Islamic Market World Index
(2418 components)
Dow Jones Islamic Market Sustainability Index(125 components)
Overlap
Top 5 Holdings (Aug ’07)
.63BP PLC1.29P&G3.25Total
.66Microsoft1.39BP PLC3.57Vodaphone
.67AT&T1.45Microsoft3.66Cisco
1.1GE1.49AT&T4.08P&G
1.35%ExxonMbl2.99%ExxonMbl4.39%BP PLC
WeightDJWI
CompWeightDJIM
CompWeightDJIM
Sustain Comp
Sector Weighting
DJW Sector Weighting
10.14%
7.79%
13.58%
10.71%
7.73%8.87%
4.74%
4.64%
22.91%
8.88%
DJIM Sustain Sector Weighting
17.23%
13.93%
9.52%
10.86%
17.80%
3.36%
4.30%
4.55%
0.00%
18.45% Oil & Gas
Basic Materials
Industrials
Consumer Goods
Health Care
Consumer Services
Telecommunications
Utilities
Financials
Technology
Regional Weighting
DJW Regional Weighting
47.09%
28.95%
21.08%
2.88%
DJIM Sustain Regional Weighting
38.03%
53.52%
8.44% 0.00%
Americas
Europe(ex.S.Africa)
Asia/Pacific
Others
0.00
500.00
1,000.00
1,500.00
2,000.00
2,500.00
3,000.00
3,500.00
DJIM Sust ain Price Ret urn (USD)
DJIM World Price Ret urn (USD)
DJ World Price Ret urn (USD)
Building IF Causeways
-IF is about Ethics
-Ethics espouse IF teachings
-Screens & Structures
+Codified
-Governance �Transparency
-Greening of IF
-Natural Cross Appeal