New York-based S&P Dow Jones Indices (S&P DJI) on Thursday launched the S&P long-term value creation (LTVC) global index.
The new index is made up of companies that have demonstrated the ability to manage both current and future economic and governance opportunities and risks by focusing on a long-term strategy, according to the company’s announcement. The companies in the index must also have a sustained history of financial quality.
“Companies with these characteristics are more likely to maintain a competitive advantage and thereby sustain stakeholder value,” the announcement says.
“Over the past few years, there has been an intensifying investor demand for a benchmark that captures companies that take a long-term approach in making business decisions,” says Alex Matturri, CEO of S&P DJI, in a statement. “The launch of the S&P LTVC global index is a manifestation of the long-termism concept with an independent and transparent approach.”
Canada Pension Plan Investment Board (CPPIB), a co-founder of the Focusing Capital on the Long Term initiative, worked collaboratively with S&P DJI to develop the new index.
“We are proud of the role our investment teams played in the development of this innovative new index from S&P DJI, as part of CPPIB’s ongoing work to advance longer-term behaviours in capital markets today,” adds Mark Wiseman, president and CEO CPPIB. “We believe this index has the potential to act as a real catalyst to encourage a greater focus on factors that contribute to long-term value creation by both corporate management and investors, all to the ultimate benefit of individual savers and beneficiaries.”
The index is constructed by combining qualitative and quantitative measures into a single metric to determine the potential for long-term value addition. The economic dimension scores provided by RobecoSAM are included in the qualitative assessment to gauge corporate governance effectiveness. The quantitative measures include return on equity, balance sheet accruals ratio and leverage ratio.