Four pension funds and two sovereign wealth funds from Canada, Europe, Asia and New Zealand have voiced their support for a new index launched by Standard & Poor’s that will measure companies' potential for creating long-term value based on sustainability criteria and financial quality.
The six institutional investors supporting the S&P LTCV Global Index are the Canada Pension Plan Investment Board (CPPIB), the Ontario Teachers’ Pension Plan (OTPP), Denmark’s ATP Group, Dutch pension fund PGGM, Singapore’s sovereign wealth fund GIC and the New Zealand Superannuation Fund. Combined, these six investors have around $1 trillion in assets under management.
A number of these investors will allocate $2 billion to funds tracking the S&P LTVC Global Index while others are closely examining their options to do the same, Focusing Capital on the Long Term (FCLT), the organisation that recommended the ratings agency develop this new index, said in a statement.
Of the $2 billion total, CPPIB, which together with McKinsey founded FCLT in 2013, has committed $1 billion. The organisation did not release the names of the other investors allocating the remaining $1 billion. It declined to comment through a spokesperson.
According to S&P, the new index is designed to measure stocks ranking highly in global equity markets, using both proprietary sustainability and financial quality criteria – return on equity, accruals ratio and financial leverage ratio.
“Investors committing to using the S&P LTVC Global Index as an investment strategy will be sending a clear signal to corporate management that these are the factors long-term investors care about as we seek to generate value-building growth over time for the benefit of savers. And, more importantly, that as investors we will stick behind the corporate management teams that choose to focus on these factors,” said Mark Wiseman, CPPIB’s president and chief executive.
Launched on January 11, the S&P LTVC Global Index includes companies that are part of the S&P Global LargeMidCap, rank in the top 50 percent of both their current RobecoSAM Economic Dimension Score, a sustainability measure, and their S&P Quality Score averaged over the last three to five years.
Currently, 246 companies from around the world comprise the index from the consumer, industrials, financial services, health care, IT, energy, telecoms and utilities sectors.
“This innovative index will provide a new tool for asset owners to identify those companies that are both oriented to the long term in their strategies and management and who have a history of financial quality,” said Ron Mock, OTPP's president and chief executive. “We at OTPP plan on taking a very close look at the index and how we can use it to invest in companies focused on the long term.”