Index Education

Spotlight on the
S&P/BMV ESG
Indices
Contributor
Aran Spivey
AnalystSustainability Indicesaran.spivey@spglobal.com

Since 2015, S&P Dow Jones Indices (S&P DJI) has had a proud
partnership with La Bolsa Mexicana de Valores (BMV Group).
Together, we develop, license, distribute and manage co-branded
indices, including equity, debt and multi-asset indices, with the aim ofbringing a more extensive line-up of index choices to the Mexicanand global financial markets.
One area of increasing interest in the indexing space is sustainability
indices, which are built to provide benchmarks focused on companies
demonstrating strong environmental, social and governance (ESG)
credentials compared with their peers. In recent years, S&P DJI has
built up its catalogue of sustainability indices to over 200, offering
investors a suite of solutions ranging from simple exclusionary
screening approaches all the way to net zero climate-focusedstrategies.
In partnership with BMV Group, we have two main equity
sustainability indices focusing on Mexican equities with asustainability lens, the S&P/BMV Total Mexico ESG Index and
S&P/BMV IPC ESG Tilted Index (see Exhibit 1). We also provide
sustainable versions of certain factor and thematic indices.

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Spotlight on the S&P/BMV ESG Indices

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Exhibit 1: Principal S&P/BMV Equity Sustainability Indices
Index Name
S&P/BMV Total
Mexico ESG Index

S&P/BMV IPC ESG
Tilted Index

Index Objective
The S&P/BMV Total Mexico ESG Index is designed to measure the performance of stocks within
the S&P/BMV Total Mexico Index that meet sustainability criteria. The index applies exclusions
based on business activities and United Nations Global Compact (UNGC) scores and is weighted
by S&P DJI ESG Score.
The S&P/BMV IPC ESG Tilted Index is designed to measure the performance of constituents in
the S&P/BMV IPC that meet sustainability criteria, while attempting to improve the overall S&P DJIESG Score with respect to the S&P/BMV IPC by over- or under-weighting companies based on
their S&P DJI ESG Scores.

Source: S&P Dow Jones Indices LLC. Table is provided for illustrative purposes.

A key input into each of these indices is the use of S&P DJI ESG Scores.1 S&P DJI ESG
Scores robustly measure ESG risk and performance factors for corporations, with a focus on
financial materiality. The fundamental research process is outlined in Exhibit 2.
Exhibit 2: How S&P Global Creates an ESG Score

Source: S&P Dow Jones Indices LLC. Chart is provided for illustrative purposes.

In addition, both indices incorporate business activity exclusions including tobacco,
controversial weapons and thermal coal to avoid exposure to companies involved in these
undesirable activities. Furthermore, each of these indices includes a screen that excludes
companies that violate the principles of the UNGC. These exclusionary criteria represent
some of the baseline standards expected by an investor wishing to select an ESG benchmark.

1

See the S&P Global ESG Scores brochure for more details on the score collection approach .

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Spotlight on the S&P/BMV ESG Indices

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Finally, the indices incorporate controversy monitoring to robustly assess where risk incidents
and controversial activities may be significant enough to cause the removal of a company fromthe index in question. In cases where risks are presented, S&P Global releases a Media andStakeholder Analysis (MSA), which includes a range of issues such as economic crime andcorruption, fraud, illegal commercial practices, human rights issues, labor disputes, workplacesafety, catastrophic accidents and environmental disasters.
S&P Global’s approach to ESG scores is driven by materiality, meaning that criteria areweighted based on the magnitude of impact to the company, the magnitude of impact on
stakeholders and the natural environment, and the probability of such impact on the company.
An example of this weighting is shown in Exhibit 3.
Exhibit 3: An Illustration of How Materiality Drives ESG Scoring
Magnitude of Impact
on Company

Magnitude of Impact on
Stakeholders and Natural
Environment

Probability of
Impact on Company

Criteria
WeightEnvironmental Policy andManagement Systems

3.6

1.7

0.8

5

Environmental Reporting

2.1

1.6

0.9

3

Operational Eco -Efficiency

3.8

3.7

0.5

7

Corporate Citizenshipand Philanthropy

1.5

2.2

0.6

2

Human Rights

2.2

2.6

0.7

4

Occupational Health and
Safety

3.4

2.2

0.8

6

3.7

2.7

0.8

8

1.5

1.5

0.9

2

2.8

3.1

0.7

6

Criteria
Environmental Criteria

Social Criteria

Governance and Economic Criteria
Corporate Governance
Information Security/
Cybersecurity and
System Availability
Supply Chain
Management

Source: S&P Dow Jones Indices LLC. Table is provided for illustrative purposes.

As outlined in Exhibit 4, the S&P/BMV ESG Indices exhibited stronger performance on a rangeof selected ESG and carbon characteristics. Not only were the overall S&P DJI ESG Scoresstronger at an index level, each of the E, S and G Dimensional Scores were improved. In
addition, although not part of the specific index objective, both ESG indices achieved an indexlevel carbon intensity improvement.

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Spotlight on the S&P/BMV ESG Indices

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Exhibit 4: Comparison of Key Index Characteristics
S&P/BMV Total
Mexico ESG Index(MXN) TR

S&P/BMV Total
Mexico Index(MXN) TR

S&P/BMV IPC ESG
Tilted Index (MXN)TR

S&P/BMV IRT

3-Year Return (%)

18.6

17.8

17.2

17.7

5-Year Return (%)

6.3

5.5

3.6

5.0

5-Year Volatility (%)

20.0

18.4

19.2

18.5

3-Year Tracking Error (%)

5.0

-

2.8

-

5-Year Tracking Error (%)

5.6

-

3.0

-

Stock Count

24

48

35

36

Weight in Top 5 Companies (%)

28.9

49.1

59.1

52.8

S&P DJI ESG Score

81.8

71.4

77.2

71.2

Environmental Score

79.7

70.9

76.9

71.1

Social Score

82.4

73.6

78.4

73.0

Governance Score

77.3

65.8

71.7

65.6

Overall ESG Score Improvement

10.4

-

6.0

-

348.1

398.0

377.7

422.4

12.5

-

10.6

-

MetricWeighted Average Carbon Intensity(tCO 2e/USD 1 Million)
Weighted Average Carbon Intensity
Improvement (%)

Source: S&P Dow Jones Indices LLC. Data as of July 31, 2023. The S&P/BMV Total Mexico ESG Index was launched June 22, 2020. The
S&P/BMV Total Mexico Index was launched June 22, 2020. The S&P/BMV IPC ESG Tilted Index was launched Nov. 22, 2021. All dat a prior
to index launch date is back-tested hypothetical data. Past performance is no guarantee of future results. Table is provided for illustrative
purposes and reflects hypothetical historical performance. Please see the Performance Disclosure at the end of this document for more
information regarding the inherent limitations associated with back-tested performance.

The main difference in approach is that the S&P/BMV Total Mexico ESG Index uses ESG
scoring as the criteria for selecting stocks—seeking to select the top 80% of stocks by S&P DJIESG Score, and then targeting the top 75% within each GICS ® sector—while the S&P/BMV
IPC ESG Tilted Index applies a tilt scaling factor across industry groups to overweightcompanies with better S&P DJI ESG Scores than their peers. The latter does not select basedon relative S&P DJI ESG Score, but rather attempts to overweight the best performers from asustainability perspective, reflecting the benchmark index sector make-up.
These two different approaches provide choice in how to integrate sustainability into decisionmaking. Through thoughtful index construction, the range of sustainability indices available inthe marketplace has grown significantly in recent years.

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Performance Disclosure/Back-Tested Data
The S&P/BMV Total Mexico ESG Index was launched June 22, 2020. The S&P/BMV Total Mexico Index was launched June 22, 2020. The
S&P/BMV IPC ESG Tilted Index was launched Nov. 22, 2021. All information presented prior to an index’s Launch Date is hypothetical (backtested), not actual performance. The back-test calculations are based on the same methodology that was in effect on the index Launch Date.
However, when creating back-tested history for periods of market anomalies or other periods that do not reflec t the general current market
environment, index methodology rules may be relaxed to capture a large enough universe of securities to simulate the target m arket the index
is designed to measure or strategy the index is designed to capture. For example, mark et capitalization and liquidity thresholds may be
reduced. Complete index methodology details are available at www.spglobal.com/spdji. Past performance of the Index is not an indication of
future results. Back-tested performance reflects application of an index methodology and selection of index constituents with the benefit ofhindsight and knowledge of factors that may have positively affected its performance, cannot account for all financial risk that may affectresults and may be considered to reflect survivor/look ahead bias. Actual returns may differ significantly from, and be lower than, back-tested
returns. Past performance is not an indication or guarantee of future results. Please refer to the methodology for the Index for more details
about the index, including the manner in which it is rebalanced, the timing of such rebalancing, criteria for additions and d eletions, as well as
all index calculations. Back-tested performance is for use with institutions only; not for use with retail investors.
S&P Dow Jones Indices defines various dates to assist our clients in providing transparency. The First Value Date is the firs t day for which
there is a calculated value (either live or back-tested) for a given index. The Base Date is the date at which the index is set to a fixed value forcalculation purposes. The Launch Date designates the date when the values of an index are first considered live: index values provided forany date or time period prior to the index’s Launch Date are considered back-tested. S&P Dow Jones Indices defines the Launch Date as thedate by which the values of an index are known to have been released to the public, for example via the company’s public website or its data
feed to external parties. For Dow Jones-branded indices introduced prior to May 31, 2013, the Launch Date (which prior to May 31, 2013, wastermed “Date of introduction”) is set at a date upon which no further changes were permitted to be made to the index methodology, but that
may have been prior to the Index’s public release date.
Typically, when S&P DJI creates back-tested index data, S&P DJI uses actual historical constituent-level data (e.g., historical price, market
capitalization, and corporate action data) in its calculations. As ESG investing is still in early stages of development, certain datapoints used to
calculate S&P DJI’s ESG indices may not be available for the entire desired period of back-tested history. The same data availability issue
could be true for other indices as well. In cases when actual data is not available for all relevant historical periods, S&P DJI may employ aprocess of using “Backward Data Assumption” (or pulling b ack) of ESG data for the calculation of back-tested historical performance.
“Backward Data Assumption” is a process that applies the earliest actual live data point available for an index constituent c ompany to all priorhistorical instances in the index performance. For example, Backward Data Assumption inherently assumes that companies currently not
involved in a specific business activity (also known as “product involvement”) were never involved historically and similarly also assumes thatcompanies currently involved in a specific business activity were involved historically too. The Backward Data Assumption allows the
hypothetical back-test to be extended over more historical years than would be feasible using only actual data. For more information on“Backward Data Assumption” please refer to the FAQ. The methodology and factsheets of any index that employs backward assumption in the
back-tested history will explicitly state so. The methodology will include an Appendix with a table setting forth the specific dat a points andrelevant time period for which backward projected da ta was used.
Index returns shown do not represent the results of actual trading of investable assets/securities. S&P Dow Jones Indices mai ntains the index
and calculates the index levels and performance shown or discussed but does not manage actual assets. Index returns do not reflect paymentof any sales charges or fees an investor may pay to purchase the securities underlying the Index or investment funds that are intended to track
the performance of the Index. The imposition of these fees and charges wo uld cause actual and back-tested performance of the
securities/fund to be lower than the Index performance shown. As a simple example, if an index returned 10% on a US $100,000 investment
for a 12-month period (or US $10,000) and an actual asset-based fee of 1.5% was imposed at the end of the period on the investment plus
accrued interest (or US $1,650), the net return would be 8.35% (or US $8,350) for the year. Over a three -year period, an annual 1.5% fee
taken at year end with an assumed 10% return per ye ar would result in a cumulative gross return of 33.10%, a total fee of US $5,375, and acumulative net return of 27.2% (or US $27,200).

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ESG Indices Disclaimer
S&P DJI provides indices that seek to select, exclude, and/or weight index constituents based on, but not limited to, certain environmental,social or governance (ESG) indicators, or a combination of those indicators, including the following: environmental indicators (including theefficient use of natural resources, the production of waste, greenhouse gas emissions, or impact on biodiversity); social ind icators (such as,
inequality and investment in human capital); governance indictors (such as sound manag ement structures, employee relations, remunerationof staff, tax compliance, respect for human rights, anti-corruption and anti-bribery matters), specific sustainability or values-related company
involvement indicators (for example, production/distribution of controversial weapons, tobacco products, or thermal coal), or controversies
monitoring (including research of media outlets to identify companies involved in ESG -related incidents).
S&P DJI ESG indices use ESG metrics and scores in the selection and/ or weighting of index constituents. ESG scores or ratings seek tomeasure or evaluate a company’s, or an asset’s, performance with respect to environmental, social and corporate governance is sues.
The ESG scores, ratings, and other data used in S&P DJI ESG indices is supplied directly or indirectly by third parties (note these parties canbe independent affiliates of S&P Global or unaffiliated entities) so an S&P DJI ESG index’s ability to reflect ESG factors de pends on thesethird parties’ data accuracy and availability.
ESG scores, ratings, and other data may be reported (meaning that the data is provided as disclosed by companies, or an asset , or as madepublicly available), modelled (meaning that the data is derived using a proprietary modelling process with only proxies used in the creation of
the data), or reported and modelled (meaning that the data is either a mix of reported and modelled data or is derived from t he vendor using
reported data /information in a proprietary scoring or determination process).
ESG scores, ratings, and other data, whether from an external and/or internal source, is based on a qualitative and judgmenta l assessment,
especially in the absence of well-defined market standards, and due to the existence of multiple approaches an d methodologies to assess
ESG factors and considerations. An element of subjectivity and discretion is therefore inherent in any ESG score, rating, or other data anddifferent ESG scoring, rating, and/or data sources may use different ESG assessment or est imation methodologies. Different persons(including ESG data ratings, or scoring providers, index administrators or users) may arrive at different conclusions regardi ng the sustainability
or impact of a particular company, asset, or index.
Where an index uses ESG scores, ratings or other data supplied directly or indirectly by third parties, S&P DJI does not accept responsibili ty
for the accuracy of completeness of such ESG scores, ratings, or data. No single clear, definitive test or framework (legal, reg ulatory, orotherwise) exists to determine ‘ESG’, ‘sustainable’, ‘good governance’, ‘no adverse environmental, social and/or other impact s’, or otherequivalently labelled objectives. In the absence of well-defined market standards and due to the existence of multitude approaches, theexercise of judgment is necessary. Accordingly, different persons may classify the same investment, product and/or strategy d ifferently
regarding ‘ESG’, ‘sustainable’, ‘good governance’, ‘no adverse environmental, social and/o r other impacts’, or other equivalently labelledobjectives. Furthermore, the legal and/or market position on what constitutes an ‘ESG’, ‘sustainable’, ‘good governance’, ‘no adverse
environmental, social and/or other impacts’, or other equivalently labelled objectives may change over time, especially as further regulatory orindustry rules and guidance are issued and the ESG sustainable finance framework becomes more sophisticated.
Prospective users of an S&P DJI ESG Index are encouraged to read the releva nt index methodology and related disclosures carefully todetermine whether the index is suitable for their potential use case or investment objective.

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