FTSE Group (“FTSE”), the award-winning global index provider, today announces changes to the FTSE4Good Index Series following the September semi-annual Review, which marks ten years since the launch and first ever review of the world’s leading Responsible Investment Index. The September review is also the first review to take place since the appointment of Sir Mark Moody-Stuart as Chair of the FTSE4Good Policy Committee.
10 years; 21 reviews; 290 companies deleted; 815 companies added
The September semi-annual review sees 22 new additions to the FTSE4Good Index Series from seven countries.
Country |
New to meeting criteria (includes companies new to the eligible universe) |
Australia |
4 |
France |
2 |
Japan |
2 |
Portugal |
1 |
Sweden |
1 |
UK |
3 |
USA |
9 |
TOTAL |
22 |
These companies include financial services provider Commonwealth Bank of Australia, Japanese brewer Kirin Holdings, UK based media company Euromoney Institutional Investor and global real estate firm CB Richard Ellis Group. At the same time, four companies are being deleted from the index having failed to meet the stringent FTSE4Good criteria (see the notes section in this press release for more details). The changes to the index will be effective after the close of markets on 16 September 2011.
Raising the hurdles
Since launch in 2001, FTSE4Good has contributed to the development of responsible business practice world-wide by challenging companies to continually improve their Environmental, Social, and Governance (ESG) performance in order to gain and maintain inclusion. Over the last ten years FTSE has strengthened the FTSE4Good ESG inclusion requirements on eight occasions. The inclusion criteria currently cover: environmental management, climate change, human and labour rights, supply chain labour standards, countering bribery, in addition to sector specific criteria for nuclear power, uranium mining, and infant food manufacturers. The aim of these positive selection criteria is to move away from negative screening (exclusion of certain sectors) and towards the identification of best ESG practices.
Effective engagement and management
Each time the criteria are strengthened, a large number of companies in the index face a choice; to either meet the new standards or risk deletion. FTSE undertakes a programme of direct engagement to provide support and guidance for such companies, in order for them to make the necessary improvements.
The Responsible Investment Unit at FTSE has engaged with over 1000 companies over the last ten years and 60% of these companies have successfully met the new standards. As a signatory to the UN-backed Principles for Responsible Investment (PRI), FTSE also supports investor collaboration to enhance ESG corporate practices. After the March 2011 review, PRI signatories were invited for the first time to join engagement with FTSE4Good Index constituents, which resulted in nine signatory investors supporting engagement with 65 companies*.
Independent oversight committees and transparent ground rules are also a key feature of indices across the board at FTSE. The FTSE4Good Policy Committee meets twice a year to review the index series and is made up of experts from within responsible investment, fund management, academia and the international business community. Earlier this year FTSE announced the appointment of Sir Mark Moody Stuart as the new chairman of the FTSE4Good Policy Committee. Sir Mark brings a huge wealth of experience including having been chairman of Royal Dutch Shell Group and Anglo American. He also brings ESG expertise as Chairman of the UN Global Compact Foundation and of Hermes Equity Ownership Services.
Sir Mark will be responsible for overseeing the evolution of the FTSE4Good inclusion criteria and ensuring that FTSE4Good remains at the forefront of Responsible Investment.
Recent innovation and future development
This semi-annual review also rounds off an important year for FTSE4Good, which has seen the launch of FTSE4Good ESG Ratings, a new data service that comprehensively measures the ESG practices of over 2,300 public companies worldwide. This is the first within a range of ESG investment tools created to support investment managers and asset owners.
Commenting on ten years of FTSE4Good, David Harris, Director of Responsible Investment at FTSE said, “After twenty reviews of the FTSE4Good indices we continue to demonstrate a capacity to affect change in corporate ESG practice and to deliver a benchmarking tool that allows investors to track the performance of the world’s leading companies. With the introduction of the FTSE4Good ESG Ratings we will further enable investors to integrate these factors into investment decision-making and stewardship in a more nuanced way that is in line with the needs of today’s ESG-conscious investor”.
Background
* Progress on this initiative will be available on the PRI intranet for signatories
Link to full documented September review changes to the FTSE4Good Index Series: http://www.ftse.com/Indices/FTSE4Good_Index_Series/Downloads/September_2011.pdf