The Spectrum Index is a robust analytical tool crafted to offer insights into three critical dimensions: economy, ESG, and freedom. By employing a weighted average approach, the index aims to provide a balanced view, ensuring each dimension is adequately represented.
Foundation of the Index: The Three Pillars
Normalisation & Rescaling of Source Indicators
Normalisation of indices is a statistical method used to rescale the values of indicators to a standard range. The Spectrum Index uses a scale 0 to 100. This process is crucial for removing units and enabling the comparison of diverse variables on a common scale. In normalisation, each original data point is adjusted according to a mathematical formula that transforms the indicator values, maintaining the relative distances between them but representing them on a simplified, standardised scale. This often involves subtracting the minimum value of the dataset from each data point, then dividing by the range of the dataset and finally, multiplying by 100. Normalisation facilitates clearer and more meaningful comparisons and aggregations of data in index construction, aiding in the analysis and interpretation of the indices.
Balanced Average Approach
To compute the overall Spectrum Index score, each of the three pillars is given a specific weightage. This ensures that the final score is a balanced representation of all three dimensions. The use of a weighted average method guarantees that even if one pillar has a higher number of metrics or resources than another, it doesn't unduly influence the overall score.
For the ESG pillar, a similar weighted average approach is employed for its three sub-components. Each sub-pillar (environment, social, governance) receives a weight, and their combined score determines the overall ESG score. This level of granularity ensures that the ESG score truly reflects the blend of its three core areas, without any single component overshadowing the others.
One of the primary objectives behind the Spectrum Index methodology is to ensure an equal distribution across the three main pillars. By doing so, the index ensures that the score isn't skewed or biassed toward any particular dimension. This equal distribution principle ensures fairness, regardless of the number of resources or metrics that might exist under a specific pillar.
Reports that are based on economic development, and measures the national level economic KPIs.
This is part of the ESG embedment of the index, and covers indicators on environmental issues and sustainability.
This is part of the ESG embedment of the index, and covers indicators on social issues and development.
This is part of the ESG embedment of the index, and covers indicators on governance indicators at institutional & economies aspects.
The freedom indicators covers aspects in freedom of economies, press, media, voice, and accountability.