About the Index

The KLD Broad Market Social SM Index (BMS) is a float-adjusted market capitalization weighted index. By capturing the best environmental, social and governance (ESG) performers in each sector of the Russell 3000 and approximating sector diversification of the Russell 3000, KLD seeks to make the BMS a complete and balanced ESG screened performance benchmark and investment universe. The BMS holds a subset of companies from the Russell 3000 Index, which represents 98% of the capitalization of the US equity market. 

Index Construction

The Russell 3000 Index, a float-adjusted market capitalization weighted index representing the 3,000 largest publicly traded US companies, serves as the baseline universe for the BMS. Only constituents of the Russell 3000 are eligible for inclusion in the BMS.

The BMS selection process involves three stages.  First, companies engaged beyond specific thresholds in certain types of business activities are automatically disqualified from consideration for the Index. These include:

	Adult Entertainment
	Alcohol
	Firearms
	Gambling
	Military

Nuclear Power

Tobacco

KLD then uses an internal ratings system based on ESG scores to rank the remaining Russell 3000 companies in relation to their sector peers. The ESG scores are based on company performance in the following issue areas:

	Community
	Corporate Governance
	Diversity
	Employee Relations
	Environment

Product Quality

Product Safety

Human Rights

Finally, KLD selects the top ESG performers that make up 65-75% of the market capitalization of each sector.  Due to certain screens some sectors may have less than 65% market capitalization representation.

Index Maintenance

The KLD BMS Index Committee reconstitutes the BMS every year on the last business day in June in conjunction with the reconstitution schedule of the Russell 3000. KLD follows Russell's rules for removing and adding companies due to corporate actions.  KLD may remove a company at any time for reasons related to its ESG performance. KLD does not replace companies removed from the BMS between reconstitutions and can only add companies at reconstitution. The BMS Index Committee makes the final decision on all changes to the Index related to ESG screens.