FROM next Monday (Dec 19), Keppel Corporation will be incorporated as a constituent on the Dow Jones Sustainability World Index, while real estate giant City Developments Limited (CDL) will be dropped.

CapitaLand Investment and Wilmar International keep their spots on the index, which captures the top 10 per cent of the world’s largest 2,500 companies with leading environmental, social and governance (ESG) performance.

The reconstitution is part of S&P Dow Jones Indices’ annual review of its family of nine Dow Jones Sustainability Indices, which are grouped around themes such as Asia-Pacific and Emerging Markets.

This year, six Singapore companies made it to the Asia-Pacific index, which represents the top 20 per cent of the 600 largest ESG-centric companies in the region, up from four last year. This is where CDL retained its spot, while Singapore Technologies Engineering and Keppel are added. ComfortDelGro, Wilmar and CapitaLand Investment are the other constituents. 

The World index comprises the cream of the crop, or “global sustainability leaders” as S&P Global calls it. The companies were identified through S&P Global’s yearly Corporate Sustainability Assessment, which uses an integrated assessment of governance and economic, environmental and social criteria to select best-in-class companies with a strong focus on long-term shareholder value.

RHB’s real estate analyst Vijay Natarajan said CDL’s exclusion from this index generally shows that there is increasing competition globally among companies to improve their sustainability standards, and is likely to spark a “marginally negative” impact on the stock.

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“From a CDL stock impact perspective, we see it as marginally negative as exchange-traded funds that track Dow Jones Sustainability World Index will rebalance their portfolios accordingly. In addition, CDL could be dropped out of ESG funds that select their stocks based on Dow Jones sustainability indices,” he said.

In a statement to The Business Times, a CDL spokesperson said the group understands the focus of the assessment for the World index centres on its global operations and ESG performance in 2021, including Millennium & Copthorne Hotels (M&C), its wholly-owned subsidiary that was privatised in November 2019.

As the hospitality sector was hard-hit by the pandemic, M&C, which has a hospitality portfolio comprising 145 hotels across 80 locations, was unable to progress fully on CDL’s integration plans and ESG alignment initiatives, the spokesperson said.

Nevertheless, she added that hotel operations are “now finally on the road to post-pandemic recovery”, so CDL has been actively engaging the M&C management team and strengthening their commitment to ESG excellence.

Outside of M&C, CDL has been “continually stepping up our ESG strategy and performance”, with a focus on driving ESG improvements across its global operations, she added.

As for Keppel, 2017 was the last year it got on the Dow Jones Sustainability Asia Pacific Index. It had never made it on the Dow Jones Sustainability World Index till this year.

Keppel’s chief executive officer Loh Chin Hua said in a statement on Dec 10 that the company was honoured to be included this time round, having put sustainability at the core of its strategy as part of its 2030 vision.

“We believe in making sustainability our business by providing solutions which contribute to sustainable development and combatting climate change,” he added. “We will continue to focus on the environmental, social and governance aspects of our business and create value for all our stakeholders.”

Globally, the top three largest World index additions, based on free-float market capitalisation, are French multi-energy company TotalEnergies, Canadian Pacific Railway, and American financial services company Moody’s.

On the other hand, the three largest companies to have lost their places are US manufacturers Caterpillar and Northrop Grumman, and French pharmaceutical and healthcare company Sanofi. 

Meanwhile, Malaysian rubber glove manufacturer Top Glove will stay on the Emerging Markets index, despite drawing criticism for reporting a negative figure for total Scope 3 (indirect emissions apart from the generation of purchased energy) emissions for its 2021 financial year. The company has since amended its carbon emissions calculations, and reported 19,916 tonnes of Scope 3 emissions in the latest fiscal year, up from 0.21 metric tonne in FY2021.

The other two Malaysian companies already on the index – Petronas Chemicals Group and MISC – retain their spots as well.