Changes Coming to GICS

Back in January 2018, S&P Dow Jones Indices and MSCI announced that certain changes would be made to GICS on September 28, 2018 (the press release can be found here). Those changes are almost upon us.

Summary of Key GICS Changes:

  • The Telecommunications Sector will be broadened and renamed Communication Services. This group will now include telecommunication companies, as well as companies selected from the Consumer DIscretionary Sector currently classified under the Media Industry Group, select companies from the Internet & Direct Marketing Retail Sub-Industry along with certain companies currently classified in the Information Technology Sector.
  • The Internet & Direct Marketing Retail Sub-Industry under Consumer Discretionary Sector will be revised to include all online marketplaces for consumer products and services.
  • Companies currently classified in the Internet Software & Services Sub-Industry (e.g., data centers, cloud networking, storage infrastructure, and web hosting services) will be moved to a new Sub-Industry called Internet Services & Infrastructure under the IT Services Industry.
  • Cloud-based software companies currently classified as Internet Software & Services will be re-classified as Application Software.

While this is interesting to note and generally something folks in business should know will happen, it may have implications for the peer groups developed by ISS and Glass Lewis for the 2019 Proxy Season. ISS does use the GICS codes as a starting point when constructing its peer groups. So, this change in GICS should be reflected in the peer groups it uses for shareholder meetings after February 1, 2019. Companies may want to simulate how their ISS peer groups may change once the ISS system has been updated to accommodate these GICS changes to ensure they have an idea of how their ISS peer group  in 2019 might change.

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