July 03, 2021

Global Choice Index Series overview

FTSE Australia 300 Choice and FTSE Developed ex Australia Choice Indexes

The Global Choice framework allows investors to align their investment choices with their values by enabling them to invest in companies that are carefully screened for product- and conduct-related issues. Once the stock universe is screened for undesirable characteristics, the index is constructed transparently using market-capitalisation weights.

This document focused on the FTSE Australia 300 Choice Index and the FTSE Developed ex Australia Choice Index to illustrate the effects of the screening. The FTSE Australia 300 Choice Index is an interesting case because the exclusions resulted in a large underweight to the Basic Materials industry and a compensating overweight to the Financials industry.

For this Choice index, at each quarterly rebalance, industry weights are constrained to be within 5% of their benchmark weights. For the Developed ex Australia index, we show that even though more than 400 stocks are excluded, the industry and country weights are similar to those of the underlying index, with the notable exception of the Energy industry.