FTSE Group (“FTSE”), the award-winning global index provider, announces the changes to the FTSE4Good Index Series following the FTSE4Good March Semi-Annual Review.
Expanding Horizons
FTSE is pleased to announce that South Korea and Israel have been added to the FTSE4Good Global universe. The expansion of the FTSE4Good Global universe brings it in line with FTSE’s decision to raise South Korea and Israel to developed market status and their subsequent entry into the FTSE All-World Developed Index. As a result, 11 South Korean and eight Israeli companies have been identified as meeting the inclusion criteria and will be entering the index series at this review. EIRIS, the research partner for the FTSE4Good Index Series, has developed partnerships with leading research organisations in both countries; Greeneye in Israel and KOCSR in South Korea, to deliver comprehensive and locally conducted research.
Replacing Activity Screens With Positive Criteria
As a result of stringent criteria for nuclear safety and waste disposal being introduced in 2010, companies involved in nuclear power generation are no longer excluded from the index series. Instead these companies will be evaluated against detailed industry-specific criteria. This review sees the addition of Enel, which has now moved to meet all the necessary measures for inclusion in the index. Enel is the second nuclear power generator to meet the criteria and enter the index series, following Iberdrola in September last year. It is expected that this will lead to improved standards across the industry as other nuclear power companies will also work to improve practices to gain index inclusion.
A more recent change to the criteria includes new guidelines, recently announced by FTSE, on Breast Milk Substitute (BMS) marketing. The criteria build on the WHO International Code of Marketing of Breast Milk Substitutes and subsequent World Health Assembly (WHA) resolutions (‘The Code’). The FTSE criteria set requirements for company policies on this issue covering lobbying, management systems, and reporting.
Once a company meets these criteria and is included in the index it will be subject to a new external verification assessment process regarding their marketing of BMS products. FTSE is leading a collaborative effort with several organisations to commission these verifications. Please see the previous press release for details (see link in Notes section below). At this review, Nestle will be added to the index having met the index criteria and will now be subject to the verification assessment to be conducted by PricewaterhouseCoopers.
Effective Engagement
In addition to the South Korean and Israeli companies entering the index series, a further 54 companies will also be added following them meeting the FTSE4Good Criteria. The companies span a number of countries including Denmark, France, Germany, Italy, Japan, Portugal, Singapore, Spain, Sweden, Switzerland, UK and the USA.
Maintaining Standards
More than 300 companies have been deleted from the FTSE4Good Series over the years for not keeping pace with the rising standards required. At this review seven companies are being deleted from the index, having failed to meet tougher requirements in time for the review. The outstanding criteria include the countering bribery standards and human labour and rights (full details on companies added and deleted can be found in the link within the notes section of this press release).
The deletions are a result of companies failing to keep pace with the continually evolving, transparent, environmental and social criteria set out in the FTSE4Good inclusion criteria available on the website. These criteria are overseen by the independent FTSE4Good Index Policy Committee, consisting of experts within responsible investment, fund management, academia and the business community.
David Harris, FTSE’s Director of Responsible Investment commented “We are excited to announce the inclusion of South Korean and Israeli companies into the FTSE4Good Index Series. As well as providing greater global representation, this index review also sees companies responding to tough new inclusion standards. This is particularly the case with regards to the criteria for nuclear power and breast milk substitute marketing, and we are delighted to see companies improving their practices and gain inclusion. This evolving nature of the index series ensures it remains reflective of the market and a leading tool for responsible investors”
Changes to the Index will take place after the close of the markets on 18 March 2011.