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Who’s In? Who’s Out? Walmart & Twitter Dropped from the S&P 500 ESG Index, among Other Major Changes

This article is reprinted from the Indexology blog of S&P Dow Jones Indices.

After markets closed on April 30, 2020, the S&P 500® ESG Index underwent its second annual rebalance since it launched in January 2019. Last year, the rebalance resulted in some changes that hit the headlines—most notably, the removal of Facebook from the sustainable version of the iconic S&P 500. With markets currently in turmoil due to the outbreak of COVID-19, interest in ESG is at an all-time high.[1] Thus, the big question, “Who made the cut?” is perhaps more relevant now than ever before.

First, let’s quickly recap the index and its objectives. The S&P 500 ESG Index aims to retain as many companies from the S&P 500 as possible (and thus closely replicate the risk/return), after removing certain companies—based on ESG principles—and re-weighting those that remain by market capitalization. Companies are excluded if they have a low ESG score relative to global industry peers, are involved in controversial weapons or tobacco, perform poorly on the principles of the UN Global Compact, or are involved in controversies deemed material to their ESG performance (according to SAM’s Media & Stakeholder Analysis). After making these exclusions, the methodology targets 75% of the market cap within index industry groups, selecting the best ESG performers using the S&P DJI ESG Scores.[2] Therefore, companies might not qualify because they are: (a) ineligible or (b) simply not selected, even if they are eligible, because of poor S&P DJI ESG Score performance relative to their peers.[3]

Constituent Selection

As of the 2020 rebalance, 311 constituents made it into the S&P 500 ESG Index, with 56 companies classified as ineligible and 138 as eligible but not selected. Exhibit 1 highlights how the S&P 500 translated into the composition of the S&P 500 ESG Index in 2020.

Exhibit 1: S&P 500 Index Weight

But what has really changed since the last annual rebalance? Exhibit 2 highlights the biggest additions and drops this year in terms of market capitalization.

Exhibit 2: Biggest Additions and Drops to the S&P 500 ESG Index

Other household names that were dropped from the index include Clorox, Twitter, Equifax, Ford Motor Company, ViacomCBS, Nordstrom, and Southwest Airlines. These were mostly eligible but simply not selected. However, Equifax and ViacomCBS were excluded for ranking in the bottom 25% of their industry group S&P DJI ESG Scores, globally, while Twitter was ineligible due to a low UNGC score. Meanwhile, American Airlines Group, Royal Caribbean Cruises, and DTE Energy were just some of the well-known companies that were added. A handful of companies that were dropped in October 2019 due to their involvement in controversies, namely Johnson & Johnson, 3M, and DuPont, were unable to rejoin, as the methodology prevents companies removed for this reason from reentering the index for one full calendar year. Notwithstanding the recent additions and drops, numerous names remained out of the S&P 500 ESG Index for failing to meet the rules-based selection criteria in both 2019 and 2020. Exhibit 3 highlights the biggest companies to remain out of the S&P 500 ESG Index this year.

Exhibit 3: Largest 10 Companies to Remain Out of the S&P 500 ESG Index

Results & Performance

The S&P 500 ESG Index achieved a 21.17% boost in its aggregate S&P DJI ESG Score performance compared with the S&P 500—with numerous positive impacts pertaining to issues like female representation in management positions, greenhouse gas emission reduction targets, effective risk culture, and many more. The S&P 500 ESG Index achieved these impacts with 83 bps of tracking error over the past five years and excess returns of 0.53% over the same period.[4] However, since the five-year return figure includes history that was built before the index was launched, it is worth paying special attention to the past one–year period, over which timeframe the S&P 500 ESG Index exhibited excess returns of 2.68% against the benchmark S&P 500, with 1.09% of tracking error (see Exhibit 4).

Exhibit 4: One-Year Historical Total Returns Performance of the S&P 500 ESG Index

It is important to note that the objective of the S&P 500 ESG Index is not to outperform the benchmark. Instead, the S&P 500 ESG Index offers a sustainable alternative to the S&P 500 with similar risk and return, while at the same time achieving a boost in S&P DJI ESG Score performance with measurable, positive impacts. In spite of the recent market volatility, however, the rules-based and beta-like S&P 500 ESG Index— driven by ESG principles—has indeed delivered on this objective, along with some welcome upside performance.[5]

[1]   ESG funds experienced record inflows in 2019 (for example, see articles from CNBCCitywire, and Morningstar), while numerous reports highlighted the outperformance of ESG strategies in Q1 2020 and Q2 2020, despite high market volatility (for example, see articles from Responsible InvestorReutersThe FT, and S&P Global Market Intelligence). Several reports have also pointed to the growing importance and interest in ESG in light of the spread of COVID-19 (for example, see articles from ForbesSchrodersAlphaSense, and Investment News).

[2]   To learn more about S&P DJI ESG Scores, please visit

[3]   To learn more about the S&P ESG Index Series Methodology, please review the methodology document, available at:

[4]   Based on hypothetical historical total returns index performance. The S&P 500 ESG Index was launched on Jan. 28, 2019.

[5]   To learn more about the recent outperformance of the S&P 500 ESG Index, see