Index focused on corporate transparency switches 20 holdings
Twenty new companies are being added to an index that focuses on the world’s most transparent companies, while 20 existing holdings are coming out.
The Transparency Index, which aims to track the top 100 companies for openness and accountability, is updating its constituents for 2022, according to CNBC.
Companies entering the index include exchange group Cboe Global Markets, education publisher Pearson and online gaming platform Roblox, reports the business news service. Nike, Zillow and Zoom Video Communications are among the issuers dropping out.
The index monitors companies across factors such as internal transparency standards, a lack of hidden fees and the simplicity of terms and conditions.
It also excludes holdings from nine sectors deemed as harmful to society or the environment: alcohol, banking, chemicals, confectionery, fossil fuel transportation, gambling, metals & minerals, oil & natural gas and tobacco.
Decisions on inclusion and exclusion are made by a proprietary algorithm, rather than a team of stock pickers. Each holding makes up 1 percent of the total assets, with rebalancing taking place every three months.
The index saw a boost in its profile last year when ARK Invest, the investment firm run by Cathie Wood, decided to use the product for a new, ESG-focused ETF. The launch marks a shift away from ARK’s existing line-up of ETFs focused on disruptive technologies.
In a video interview last week, Rainford Knight, CEO of Transparency Invest, which operates the index, said greater transparency leads to improved employee retention, customer satisfaction, profitability and brand loyalty.
‘When we’re talking about transparency, we’re talking about a company really being open and honest in its communications with its shareholders [and other] stakeholders,’ he said. ‘From an investor perspective, transparency leads to performance and impact – so you can do good and do well at the same time.’
Recent years have seen surging interest in thematic investing, where investment products focus on a particular theme such as cyber-security or clean energy. In the three years to March 2021, assets held by thematic funds tripled to $595 bn, according to data from Morningstar.