Social Studies

Some of the factors that count in favor of a company in the qualitative screens are whether it shows evidence of innovation, or has progressive policies in social and environmental areas. Such behavior could include extensive employee benefits packages, or support of charities or other functions within local communities. Companies included in the new index include Oracle, in part because of its strong diversity policies; Qualcomm, because of exceptional employee involvement policies; and Amgen, because of its community involvement. Says Gupta, “We don”t include companies on any of our indexes that have a record of detrimental behavior to society.” The index does not release names of companies that did not pass their screens, but will say that stumbling blocks to listing on the index include such areas as a history of discrimination lawsuits, significant and recent environmental liabilities, or a lack of female or diversity representation in management or board positions.

Announced in mid-February, the index saw its official debut on January 1, 2002, when it began tracking stocks. It had been under development since the fall of 2001. Currently there are no financial products available based on the index, but KLD is in discussion with a number of institutions, says Gupta, for the creation of such products, including the possibility of mutual funds, within the next few months.

Advisors may want to follow these developments. Those with clients who have particular concerns not covered in the main screens, such as animal welfare or particular “green” standards, should contact KLD directly, says Gupta, to indicate their interest in the possible addition of such screens to the process.