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Target Rock Advisors
VALUE PROPOSITION
SUSTAINABILITY & SOCIALLY
RESPONSIBLE INVESTING
PRODUCTS & SERVICES
SUSTAINABILITY SCORING
& INDEXING PROCESSES
SUSTAINABLE UTILITY
LEADERS INDEX
FAQ

INDEXING METHODOLOGY



Below is a brief description of our indexing methodology. Detail on components, weightings, performance, volatility, and the like can be found here and here.

Size
Indexes that reflect top and bottom performance groups in a given sustainability category have fifteen component companies each. Indexes that reflect the middle performance group are comprise the remaining nineteen companies. We feel that a group of at least fifteen companies offers enough diversity and liquidity to serve as a foundation for our indexes.

Liquidity
The Target Rock indexes are niche, thematic single-sector indexes and thus naturally have a smaller total market capitalization than broader utility indexes such as the Dow Jones Utility Average (DJU), S&P Utilities (SPU), and Philadelphia Utility Index (UTY).

Nonetheless, the Target Rock indexes – particularly the high performer indexes – are relatively liquid in comparison. For example, the High Sustainability Index has an average market capitalization of about $14 billion versus a $16 billion average for DJU, SPU, and UTY, and an average free float of 3.4% compared to 3.1%.

Weightings
Companies within each index are weighted by overall Sustainability Score, except for the three ESG indexes where they are weighted by overall ESG score.

We considered traditional market capitalization weighting but feel score-based weighting is the most appropriate methodology for our sustainability and ESG indexes. It gives slightly more representation to more sustainable companies (and vice versa), but still limits the influence of extremes in market capitalization and price movement.

Re-Balancing
All Target Rock indexes are re-balanced annually, at the beginning of each year.

These indexes are based on our sustainability scoring system, which in turn relies heavily on electric and gas operating data that are released on an annual basis.

We update our models more frequently -- anywhere from weekly to quarterly, depending on the data set -- and will comment intra-year about events and trends, but overall Sustainability Scores and index components will remain the same throughout the year barring a major event.
  • Family of thematic, sector-specific indexes, covering all capitalizations
  • Unique, proprietary basis for selecting index components
  • Improved line-of-sight between sustainability practices and stock performance