FAQ
Who developed the Global Challenges Index?
The Global Challenges Index was initiated by BÖAG Börsen AG, the parent company operating the stock exchanges in Hamburg and Hanover. Börsen AG was formed as a result of an agreement between the two stock exchanges in 1999. Today, Börsen AG’s trading partners include over 170 lending institutions and securities brokers, some of which are based abroad. Its four segments (Official Market, Regulated Market, Start-up Market and Open Market) offer a broad range of products and services for institutional and private investors as well as for company flotations.
The Hanover stock exchange commissioned oekom research AG to develop the concept for the Global Challenges Index and to compile the Index universe. oekom research is an independent sustainability rating agency specialising in the evaluation of companies and countries on the basis of social, environmental and ethical criteria. oekom research will monitor the companies listed in the Index with regard to their sustainability-related performance and potential violations of the specified exclusionary criteria.
The NORD/LB Norddeutsche Landesbank gave technical assistence to BÖAG Börsen AG to realise the index concept. With 5,560 employees and a group-wide balance sheet total of 203.1 Billion Euro she is the leading commercial bank in northern Germany with focus on northern and northeastern Europe. Deutsche Börse AG calculates the Index figures on behalf of BÖAG Börsen AG.
The Hanover stock exchange commissioned oekom research AG to develop the concept for the Global Challenges Index and to compile the Index universe. oekom research is an independent sustainability rating agency specialising in the evaluation of companies and countries on the basis of social, environmental and ethical criteria. oekom research will monitor the companies listed in the Index with regard to their sustainability-related performance and potential violations of the specified exclusionary criteria.
The NORD/LB Norddeutsche Landesbank gave technical assistence to BÖAG Börsen AG to realise the index concept. With 5,560 employees and a group-wide balance sheet total of 203.1 Billion Euro she is the leading commercial bank in northern Germany with focus on northern and northeastern Europe. Deutsche Börse AG calculates the Index figures on behalf of BÖAG Börsen AG.
What differentiates the Global Challenges Index from other sustainability indexes?
The Global Challenges Index is principally distinguished by the following features:
Thematic focus:
the focus on seven specific themes – climate change, drinking water, deforestation, biodiversity, population development, poverty and global governance – which are internationally recognized as global challenges in political, economic and social terms, takes the guiding principle of sustainable development, often criticised for its abstract nature, and renders it easier to understand.
Use of an absolute best-in-class principle:
companies which are included in the Index must satisfy high standards in terms of their social and environmental performance. Being the best company in a particular industry in relative terms is not sufficient for inclusion in the Index. Companies must also fulfil high sustainability standards according to absolute benchmarks. This is ensured by including only companies which have been awarded “prime” status by oekom research.
Strict exclusion criteria:
in addition to the exclusion of controversial areas of business (e.g. nuclear power, genetic engineering in agriculture and armaments), companies which in their business practices violate recognized standards in the areas of the environment, labour rights and human rights, as well as corporate governance, will also be excluded from the Index.
Focus on companies that take positive action:
companies included in the Index will be those which make an active contribution to bringing about positive change to risk scenarios in the seven fields for action and in doing so create opportunities for themselves.
Thematic focus:
the focus on seven specific themes – climate change, drinking water, deforestation, biodiversity, population development, poverty and global governance – which are internationally recognized as global challenges in political, economic and social terms, takes the guiding principle of sustainable development, often criticised for its abstract nature, and renders it easier to understand.
Use of an absolute best-in-class principle:
companies which are included in the Index must satisfy high standards in terms of their social and environmental performance. Being the best company in a particular industry in relative terms is not sufficient for inclusion in the Index. Companies must also fulfil high sustainability standards according to absolute benchmarks. This is ensured by including only companies which have been awarded “prime” status by oekom research.
Strict exclusion criteria:
in addition to the exclusion of controversial areas of business (e.g. nuclear power, genetic engineering in agriculture and armaments), companies which in their business practices violate recognized standards in the areas of the environment, labour rights and human rights, as well as corporate governance, will also be excluded from the Index.
Focus on companies that take positive action:
companies included in the Index will be those which make an active contribution to bringing about positive change to risk scenarios in the seven fields for action and in doing so create opportunities for themselves.
Why were these particular seven fields for action singled out?
The selection of the seven fields for action – climate change, drinking water, deforestation, biodiversity, population development, poverty and global governance – is based on a comprehensive analysis of political, economic and social target systems which are concerned with the global challenges facing mankind and the role of the economy in surmounting these challenges. Of particular significance in this context are the United Nations’ Millennium Development Goals, the European Union’s sustainability strategy, the Global Environmental Outlook of the United Nations Environment Programme (UNEP) and the ten Principles of the UN Global Compact. Seven of the challenges seen as particularly relevant were selected for the Index. Adherence to the principles of the Global Compact is guaranteed by the defined exclusion criteria.
Can companies make a contribution to dealing with the global challenges?
The opportunities for companies, within the scope of their core business, to take action in the individual fields for action vary in their extent. While recent developments show that companies can make a huge contribution to dealing with the causes and consequences of climate change and thereby create opportunities for their corporate development, the immediate opportunities for action in other areas, in particular where poverty and population explosion are concerned, are more complex and less obvious.
Nonetheless, the Index shows that here, too, forward-looking activities are already taking place. One example of this is activity relating to combating poverty. Where the focus is on improving the capacity of people to overcome poverty by their own efforts, through empowerment, companies are required to use their competency and financial strength to make an active contribution. Relevant fields for action include measures to reduce people’s vulnerability (e.g. through microinsurance), to support economic development (e.g. through fair trade or microcredits) and the improvement of education and access to information (e.g. by overcoming the digital divide).
Overall, the companies which will profit particularly in terms of their profitability and thus also the value of the company are those which tackle the global challenges proactively. Firstly, they will counter existing acute and/or potential risks to the company’s success, and secondly, they will open up opportunities for company development, in particular by:
Nonetheless, the Index shows that here, too, forward-looking activities are already taking place. One example of this is activity relating to combating poverty. Where the focus is on improving the capacity of people to overcome poverty by their own efforts, through empowerment, companies are required to use their competency and financial strength to make an active contribution. Relevant fields for action include measures to reduce people’s vulnerability (e.g. through microinsurance), to support economic development (e.g. through fair trade or microcredits) and the improvement of education and access to information (e.g. by overcoming the digital divide).
Overall, the companies which will profit particularly in terms of their profitability and thus also the value of the company are those which tackle the global challenges proactively. Firstly, they will counter existing acute and/or potential risks to the company’s success, and secondly, they will open up opportunities for company development, in particular by:
- ensuring the long-term availability of resources, for example through sustainable forestry and fisheries management,
- reducing market-price risks, for example through increasing energy efficiency and ensuring access to raw materials,
- preserving competitiveness through technical innovation, for example in the area of renewable energies,
- opening up new markets, for example in the area of microfinance,
- maintaining and improving their social acceptance and reputation.
How are companies selected for the Global Challenges Index?
The selection of companies is carried out in two steps:
In its Corporate Responsibility Rating, oekom research checks the companies’ conformance to social and environmental standards. Only those companies which satisfy this absolute best-in-class approach and have been awarded “prime” status by oekom research are in principle qualified for the Index.
The companies are also assessed regarding their compliance with the stringent exclusionary criteria.
In a second step, oekom research identifies those companies which have made substantial contributions to surmounting the global challenges and in doing so have opened up for themselves the opportunities described. A financial analysis ensures that the selected companies also satisfy the minimum requirements in terms of market capitalisation.
An independent advisory board advises oekom research on developing the concept, on defining the positive and exclusion criteria and on identifying suitable securities.
In its Corporate Responsibility Rating, oekom research checks the companies’ conformance to social and environmental standards. Only those companies which satisfy this absolute best-in-class approach and have been awarded “prime” status by oekom research are in principle qualified for the Index.
The companies are also assessed regarding their compliance with the stringent exclusionary criteria.
In a second step, oekom research identifies those companies which have made substantial contributions to surmounting the global challenges and in doing so have opened up for themselves the opportunities described. A financial analysis ensures that the selected companies also satisfy the minimum requirements in terms of market capitalisation.
An independent advisory board advises oekom research on developing the concept, on defining the positive and exclusion criteria and on identifying suitable securities.
What exclusion criteria are used?
In compiling the Index, strict exclusion criteria in three areas are taken into account:
Firstly, companies are excluded if they are active in areas of business which are seen as counterproductive for dealing with the global challenges.
These include the following areas of business: nuclear power, biocides, chlororganic mass production, genetic engineering in agriculture and military.
Secondly, companies are excluded if they engage in controversial business practices which violate recognized environmental and human rights and employment standards. These include, for example, violations in the areas of freedom of association and assembly, forced labour, discrimination and child labour.
Finally, the behaviour of companies in the areas of corporate governance and business ethics is analysed. Companies with violations in the areas of corruption and accounting fraud will not be included in the Index.
These exclusion criteria also cover the requirements for companies set out in the UN Global Compact. All companies, in every case, will be checked for observance of all the exclusion criteria.
Firstly, companies are excluded if they are active in areas of business which are seen as counterproductive for dealing with the global challenges.
These include the following areas of business: nuclear power, biocides, chlororganic mass production, genetic engineering in agriculture and military.
Secondly, companies are excluded if they engage in controversial business practices which violate recognized environmental and human rights and employment standards. These include, for example, violations in the areas of freedom of association and assembly, forced labour, discrimination and child labour.
Finally, the behaviour of companies in the areas of corporate governance and business ethics is analysed. Companies with violations in the areas of corruption and accounting fraud will not be included in the Index.
These exclusion criteria also cover the requirements for companies set out in the UN Global Compact. All companies, in every case, will be checked for observance of all the exclusion criteria.
What experience does oekom research have in the area of sustainable investment?
oekom research AG has been active in the field of sustainable investment for nearly 15 years, making it one of the pioneers of this form of investment in Europe.
The company specialises in the social and environmental rating of companies and countries. Building on the Frankfurt-Hohenheim guidelines, oekom research has developed a comprehensive rating approach for the evaluation of companies, the “Corporate Responsibility Rating”.
oekom research’s customers currently include numerous institutional investors and financial service providers from Germany, France, Austria, Japan and Switzerland. oekom’s research is currently used in the management of funds and mandates with a total volume of € 85 billion.
The company specialises in the social and environmental rating of companies and countries. Building on the Frankfurt-Hohenheim guidelines, oekom research has developed a comprehensive rating approach for the evaluation of companies, the “Corporate Responsibility Rating”.
oekom research’s customers currently include numerous institutional investors and financial service providers from Germany, France, Austria, Japan and Switzerland. oekom’s research is currently used in the management of funds and mandates with a total volume of € 85 billion.
What is oekom’s “prime status”?
Within the scope of its Corporate Responsibility Rating, oekom research evaluates companies’ social and environmental performance. In the rating, prime status is awarded to those companies which satisfy the requirements defined by oekom research in collaboration with an independent rating committee. It is not sufficient here to be one of the best companies in an industry in relative terms; companies must also conform to absolute standards. oekom research describes this as an “absolute best-in-class approach”.
As the sustainability requirements and company-management prerequisites vary from industry to industry, both the evaluation criteria and the standards are defined independently for each industry. This means that in some industries a rating of C+ is sufficient to gain prime status, whereas in other industries it is necessary to achieve a B to qualify for inclusion in the prime universe. Overall, oekom research’s evaluation scale ranges from A+ to D-, and is defined as follows:
A = The company is performing outstandingly well
B = The company’s actions are largely progressive
C = The company has taken basic measures
D = The company shows little commitment
As the sustainability requirements and company-management prerequisites vary from industry to industry, both the evaluation criteria and the standards are defined independently for each industry. This means that in some industries a rating of C+ is sufficient to gain prime status, whereas in other industries it is necessary to achieve a B to qualify for inclusion in the prime universe. Overall, oekom research’s evaluation scale ranges from A+ to D-, and is defined as follows:
A = The company is performing outstandingly well
B = The company’s actions are largely progressive
C = The company has taken basic measures
D = The company shows little commitment
What role does the independent advisory board play?
The independent advisory board advises oekom research on developing the concept, on defining positive and exclusion criteria and on identifying suitable securities. The competencies and functions of the advisory board are regulated by a statute.
The following people are currently members of the board:
The following people are currently members of the board:
- Dr. Bernd Balkenhol, ILO (Geneva)
- Dr. Bernhard Bauske, Head of Strategic Corporate Alliances, WWF Deutschland (Frankfurt)
- Dr. Hermann Falk, Member of Executive Management, Association of German Foundations (Berlin)
- Sr. M. Juliane Flormann osf, Monastery Sießen
- Caspar von Hauenschild, Member of the Board, Transparency International (Berlin)
- Dr. Rolf Krämer, Vice President of the Evangelical Lutheran Church of Hanover (Hanover)