Ethos Foundation has unveiled the Ethos Swiss Corporate Governance Index, measuring the return on selected Switzerland-domiciled equities adhering to best practice requirements in corporate governance. The index may serve as the basis for future investment products including exchange-traded funds.

The Ethos Swiss Corporate Governance Index reduces exposure to firms with high ESG-related risks as identified by the “Ethos Corporate Governance Principles”.

Composed of over 200 Swiss pension funds, Ethos has been promoting socially responsible investing since its establishment in 1997. Ethos aims to use the new index to raise awareness of specific corporate governance risks, and encourage investors to commit to a stable and sound economic environment that safeguards the long-term interests of society as a whole.

The starting universe for the new index is the Swiss Performance Index, Switzerland’s most closely followed performance index. It is a dividend-corrected index that includes all SWX Swiss Exchange-traded equity securities of companies domiciled in Switzerland.

From this parent index, the Ethos index methodology underweights or excludes issuers based on corporate governance risks as identified by Ethos’ proprietary, rules-based “Ethos Corporate Governance Principles”. Such risks include opting up/out clauses, multiple share classes, unequal capital structures, low board independence including the combination of chairman and CEO positions, and dubious executive remuneration policies. The methodology also reduces exposure to ESG-related risks, firms embroiled in controversy, and aims at an improved carbon profile of the index. In this vein, companies with substantial CO2 emissions will be underweighted.

Weight per stock within the final index will be capped at 15%.

Ethos Foundation’s’ CEO Vincent Kaufmann, said: “The innovative methodology of this index allows mitigation of the risks of poor corporate governance that are ignored by the classic indices. This provides investors with a better protection from corporate governance risks.

SIX Swiss Exchange will be calculating the Ethos Swiss Corporate Governance Index on behalf of Ethos.