SELCTION CRITERIA
The Global Challenges Index is principally distinguished by the following features:
Thematic focus:
the focus on seven specific themes – climate change, drinking water, deforestation, biodiversity, population development, poverty and global governance – which are internationally recognized as global challenges in political, economic and social terms, takes the guiding principle of sustainable development, often criticised for its abstract nature, and renders it easier to understand.
Use of an absolute best-in-class principle:
companies which are included in the Index must satisfy high standards in terms of their social and environmental performance. Being the best company in a particular industry in relative terms is not sufficient for inclusion in the Index. Companies must also fulfil high sustainability standards according to absolute benchmarks. This is ensured by including only companies which have been awarded “prime” status by oekom research.
Strict exclusion criteria:
in addition to the exclusion of controversial areas of business (e.g. nuclear power, genetic engineering in agriculture and armaments), companies which in their business practices violate recognized standards in the areas of the environment, labour rights and human rights, as well as corporate governance, will also be excluded from the Index.
Focus on companies that take positive action:
companies included in the Index will be those which make an active contribution to bringing about positive change to risk scenarios in the seven fields for action and in doing so create opportunities for themselves.
Climate change
Positive criteria:
Selection of companies that make active and substantial contributions to dealing with the causes and consequences of climate change:
- Combating the causes by significantly reducing the emission of greenhouse gases e.g. through energy- and fuel-saving products, contributing to increasing energy efficiency and providing energy from renewable sources;
- Dealing with the consequences of climate change, e.g. in the areas of insurance cover, property and flood protection.
Drinking Water
Positive criteria:
Selection of companies that make active and substantial contributions to the supply, processing and distribution of drinking water, e.g. waste water purification, water treatment and distribution.
Exclusionary criteria:
- Controversial environmental practices
Cases involving gross disregard by a company of environmental legislation or generally recognised minimum environmental standards/codes of behaviour constitute a negative criterion. These include, for example, large-scale projects (e.g. pipelines, mines, power stations, dams) which have a particularly deleterious impact on ecosystems in the region concerned. A differentiation is made between those immediately causing the impact (e.g. operators of controversial projects), suppliers/subcontractors (especially those which have no long-term involvement in the controversial action/project) and financiers (e.g. banks which provide capital for relevant projects through project financing). Companies immediately causing the impact, suppliers/subcontractors and financiers will be excluded.
Deforestation
Positive criteria:
Selection of companies that make active and substantial contributions to the sustainable management of forests and forestry products (wood, paper) e.g. through FSC certification or the use of recycled material in the production of paper and cardboard.
Exclusionary criteria:
- Controversial environmental practices
Cases involving gross disregard by a company of environmental legislation or generally recognised minimum environmental standards/codes of behaviour constitute a negative criterion. These include, for example, large-scale projects (e.g. pipelines, mines, power stations, dams) which have a particularly deleterious impact on ecosystems in the region concerned. A differentiation is made between those immediately causing the impact (e.g. operators of controversial projects), suppliers/subcontractors (especially those which have no long-term involvement in the controversial action/project) and financiers (e.g. banks which provide capital for relevant projects through project financing). Companies immediately causing the impact, suppliers/subcontractors and financiers will be excluded.
Biodiversitity
Positive criteria:
Selection of companies that make active and substantial contributions to the protection and preservation of species diversity, e.g. by using sustainable catch methods in the fishing industry as defined by the Marine Stewardship Council (ocean protection) or near-natural agricultural practices, or by taking appropriate criteria into account in project financing and lending.
Exclusionary criteria:
- Controversial environmental practices
- Biocides
The production of biocides which are classified by WHO as "extremely or highly hazardous" constitutes a negative criterion. Producers (upward of >5% proportion of turnover) will be excluded.
- Chlororganic mass production
The production of PVC, as well as substantial activity in the field of chlorine chemistry, constitute a negative criterion. Producers (upward of >5% proportion of turnover) will be excluded.
- Genetic engineering in agriculture
Genetically modified plants and animals constitute negative criteria with focus on producers (i.e. the companies which undertake the modification of the genetic material and produce the corresponding seed or animals). Producers (upward of >0% proportion of turnover) will be excluded.
Population development
Positive criteria:
Selection of companies that make active and substantial contributions to dealing with demographic change and/or population development in newly industrialising and developing countries, in particular through access to education, medicine and medical care, especially in relation to HIV/AIDS.
In view of demographic trends in numerous industrialised countries, the emphasis is on products and services which provide for the needs of an ageing population, e.g. age-appropriate housing, medical and care provision.
Poverty
Positive criteria:
Selection of companies that make active and substantial contributions to combating poverty worldwide. The focus is on measures which through empowerment improve people‘s capacity to overcome poverty by their own efforts. These include, in particular, measures for reducing vulnerability (e.g. through microinsurance), for supporting economic independence (e.g. fair trade, microcredit), for improving access to information (e.g. overcoming the digital divide) and for combating corruption.
Exclusionary criteria:
- Labour rights
Where there is a serious breach of at least one of the four basic principles of the ILO Declaration on Fundamental Principles and Rights at Work (freedom of association and assembly, forced labour, child labour and discrimination), this constitutes a negative criterion. Negative criteria also apply where minimum employment standards (e.g. in the areas of health and safety, remuneration, working hours) are systematically circumvented, even where these do not relate directly to the four ILO conventions (see above). A differentiation is made according to whether minimum standards are breached by the company itself or by suppliers/subcontractors. Companies which themselves or their suppliers or subcontractors violate the principles in the areas of freedom of association and assembly, forced labour or discrimination will be excluded.
- Child labour
Any child labour which is not expressly permitted by the ILO (depending on e.g. age of child, employment conditions, hours worked and accompanying education offered) constitutes a negative criterion. For labour to be classified as child labour it must as a rule be permanent and systematic. Companies which themselves or their suppliers or subcontractors violate the principles in the area of child labour will be excluded.
- Human rights
Corporate Governance
Positive criteria:
Selection of companies that make an active contribution to combating corruption and bribery in the economy and have implemented core elements of a compliance management system (CMS). These include in particular a relevant code of conduct, the appointment of a compliance officer, guidelines for the selection of suppliers and the acceptance of gifts, internal company communications and training and ongoing monitoring of compliance with the relevant regulations.
Exclusionary criteria:
- Business malpractice
ACases where a company seriously disregards legal requirements or generally recognised codes of good behaviour constitute a negative criterion. Companies which have committed violations in the areas of corruption and accounting fraud will be excluded.
Further exclusionary criteria:
- Nuclear energy
Various aspects of the value chain in the nuclear energy field constitute negative criteria. A differentiation is made between, in particular, the production and distribution of nuclear energy, but also the mining of uranium and the assembly of key components for nuclear power stations. "Dual-use products", as they are known, are not taken into account.
Producers of nuclear power (upward of >0% proportion of turnover), uranium (upward of >0% proportion of turnover) and key components of nuclear power stations (upward of >0% proportion of turnover) will be excluded.
- Military
Armaments which have been specially developed for military applications constitute a negative criterion. This does not include "dual-use products". A differentiation is made between producers and distributors. Among armaments, differentiation is also made between weapons (systems) (e.g. rifles, tanks, fighter jets), weapons outlawed by the Rome Statute of the International Criminal Court (e.g. weapons of mass destruction, land mines) and other armaments (e.g. radar installations, military transport vehicles). Producers of weapons (systems) (upward of >0% proportion of turnover), outlawed weapons (upward of >0% proportion of turnover) and other armaments (upward of >0% proportion of turnover) will be excluded.