U.S. Community Investing Index

 

Overview

The U.S. Community Investing IndexTM 1 (“USCII” or “the Index”; Bloomberg Ticker: CMTYIDX) is an index of publicly traded companies designed to identify those that contribute positively to the communities in which they source, operate, and sell.

Heron developed the index in 2005 to understand how large companies contribute to (or detract from) Heron’s mission to help people and communities help themselves out of poverty. Over the past decade, Heron and its research partners have refined the methodology to draw from new data sources and better align the index with Heron’s strategic objectives.

Strategy

Heron and its research partnersuse a rigorous methodology to identify companies that contribute positively to the communities in which they source, operate, and sell. The positive screen is organized around the four capitals of Heron’s Net Contribution lens. Heron works with custom data and research providers to evaluate the impact of companies on stakeholders within these four capitals.

 

Index Performance

*Source: Bloomberg price returns (not adjusted for dividends). Returns greater than one year are annualized.

Process

Index Creation

Heron is responsible for selecting securities in the index, and it does so by compiling a positive screen using the four capitals and their underlying stakeholders.

Heron uses absolute weighting coefficients at the capital level:

  • 30 percent: Human Capital (including employees and suppliers)
  • 30 percent: Civic Capital (including government, customers, and neighbors)
  • 20 percent: Natural Capital (including environmental inputs to and outputs from production)
  • 20 percent: Financial Capital (including the board, management, and investors)

Heron then dynamically weights stakeholder scores depending on what is relevant to any given industry.3 For example, suppliers may represent between 10 percent and 60 percent of the Human Capital score, depending on how heavily the company relies on outsourced labor. The industry-relative stakeholder weighting coefficients are informed by Heron’s research partners.

Each company is scored between -5 and +5, and companies that score a 0 or higher are considered for inclusion in the index.

The selection universe is then run through a rules-based “reality check” that looks for additional controversies that are deemed very severe. These controversies may have been over- or under-expressed in the scoring process due to timing, score weighting, or other factors. The reality check is conducted quarterly and reviewed by Heron’s staff and the USCII advisory committee.

The USCII is then constructed using a free-float-adjusted market-capitalization weighting methodology, managed by S&P Dow Jones Indices.

Index Monitoring

The U.S. Community Investing IndexTM

Product Creation

State Street Global Advisors (“SSGA”) has created an investment vehicle that aims to replicate the Index.


[1] The U.S. Community Investing Index (the “Index”) is the property of the F.B. Heron Foundation, which has contracted with S&P Opco, LLC (a subsidiary of S&P Dow Jones Indices LLC) to calculate and maintain the Index. The Index is not sponsored by S&P Dow Jones Indices or its affiliates or its third-party licensors (collectively, “S&P Dow Jones Indices”). S&P Dow Jones Indices will not be liable for any errors or omissions in calculating the Index. “S&P Dow Jones Indices” and the related stylized mark(s) are service marks of S&P Dow Jones Indices and have been licensed for use by the F.B. Heron Foundation. S&P® is a registered trademark of Standard & Poor's Financial Services LLC (“SPFS"), and Dow Jones® is a registered trademark of Dow Jones Trademark Holdings LLC (“Dow Jones”).

[2] The methodology management and maintenance relies on custom research partnerships with oekom research AG and the National Center for Employee Ownership (NCEO)

[3] Capital coefficients are consistently applied to all companies/industries (Human 30%, Civic 30%, Natural 20%, and Financial 20%). Stakeholder coefficients rely on the industry-relative stakeholder materiality assessment conducted by oekom research AG, so will vary by company.