How are the scores of the companies on the KLD SSI determined?
The scores are derived from the ratings awarded to a company in its social and environmental profile. To come up with a score, the concerns are subtracted from the strengths and are normalized to give each issue area the same weight. KLD rates companies in 7 issue areas: community, corporate governance, diversity, employee relations, environment, product, and human rights. Finally to determine the company’s weight in the Index, KLD applies an optimization process using the company’s score, market cap, and industry. The optimization process allows for the Index to approximate the same industry weights as the FTSE All World USA (upon which it is based), while controlling risk.
