SRI Stock Indexes

The oldest and most widely known stock index is that of the Dow Jones, often used as the benchmark to which other stock indexes are compared.

"The Dow Jones Industrial AverageSM is without a doubt the most widely followed and recognized stock index in the world. First published in 1896, the DJIASM tracks the average price of 30 large capitalization New York Stock Exchange stocks-all household names that trade heavily in the United States as well as in major foreign stock markets. These 30 stocks have a total market value of more than $2 trillion and represent roughly one fifth of the market value of all U.S. stocks."

There are firms that have developed their own SRI-based stock index, and perform the research needed to keep it updated: Good Money, Inc. and KLD, Inc. Their Good Money Industrial Average and the Domini 400 Social Index are provided as examples.

Good Money Industrial Average

The Good Money Industrial Average, a stock average designed by Professor Ritchie Lowry ( of Boston College Sociology Department) based on socially responsible but otherwise equivalent stocks, outperformed the Dow Jones Industrial Average by a factor of two between 1976 and 1995.

The Domini 400 Social Index

"The Domini 400 Social Index (DSI) is the established benchmark for measuring the impact of social screening on financial performance. Launched in May 1990, the DSI is the first benchmark for equity portfolios subject to multiple social screens.

Composition of the Index

The DSI is a market capitalization-weighted common stock index modeled on the Standard & Poor's 500 (S&P 500).

In 1990, KLD created the DSI by starting with the companies in the S&P 500.

KLD first applied a set of exclusionary screens, eliminating companies involved in alcohol, tobacco, gambling, military contracting, nuclear power, or with operations in South Africa.

Next, KLD applied qualitative screens in the areas of community, diversity, employee relations, environment, and product safety. Approximately 250 companies remained after this screening process.

KLD then looked at large capitalization companies not in the S&P 500 that passed the exclusionary screens and, in most cases, exhibited an outstanding record in one of the qualitative screening areas. From these, KLD selected approximately 100 companies to provide broad industry representation.

Finally, KLD added 50 firms with exceptional social characteristics.

The DSI's Performance

The DSI has outperformed the S&P 500 on a total return basis and on a risk-adjusted basis since its inception in May 1990. The graph above shows the comparative total return performance of the DSI, the S&P 500 and the Russell 1000 as of 3rd quarter 1997."

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Last update of this page September 12, 2000