A decade after the launch of the ground-breaking FTSE4Good Index Series, FTSE Group, the award winning index provider, today announces the launch of the FTSE4Good ESG Ratings. This new data service provides a comprehensive, transparent and objective system to measure the Environmental, Social and Governance (ESG) practices of over 2,300 public companies worldwide.
There is an increasing awareness that ESG factors are an important component in understanding corporate risks and performance and in the achievement of long-term, sustainable investment returns. In the decade ahead the integration of ESG factors into investment analysis, decision-making and stewardship is expected to increase. Globally, 227 asset owners and 496 asset managers have signed up to the United Nations Principles for Responsible Investment (PRI), thereby committing to integrating ESG considerations into their investment and stewardship approaches.
The FTSE4Good ESG Ratings provide institutional investors with a flexible and granular scoring model which will enable them to understand a company’s ESG practices in multiple dimensions;
• Overall ESG rating• Scores against a broad Environmental, Social and Governance pillar • Measurement against six ESG criteria themes including; environmental management, climate change, human and labour rights, supply chain labour standards, corporate governance and countering bribery.
The ratings are risk-relative and indicate a company’s success at managing its company-specific ESG risks. This means companies with higher ESG risks have more to achieve in order to obtain a high score. The new FTSE4Good ESG Ratings provide a flexible tool for active portfolio management, manager selection, company engagement, risk management, company research and corporate ESG benchmarking. Active portfolio managers can use the ratings to define an eligible investment universe or apply the ratings to a propriety investment model.
Institutional investors can use the ratings to help them assess their portfolios against ESG themes and their exposure to ESG risks. As more fund managers and asset owners choose to engage with companies as part of their stewardship responsibilities, the ratings can provide them with an independent and objective measure to identify companies with whom they might engage and to track their progress.
The FTSE4Good ESG Ratings criteria are publicly available and follow clearly defined methodology and rules. To ensure their quality and accuracy they are overseen by an independent committee made up of experts from the investment community, academia, the business community, unions and NGOs. Company ratings are re-assessed twice a year by leading research provider, EIRIS.
“With the launch of the FTSE4Good ESG Ratings we are building on 10 years of FTSE4Good index experience” said Mark Makepeace, Chief Executive of FTSE Group. “The new Ratings service provides an easy to use and objective measure of corporate ESG practice and risk. Today we are also highlighting those companies that, based on our Ratings, have leading ESG practices.”
The Rt Hon Vince Cable, Secretary of State, who is a keynote speaker at the event taking place in London this evening to celebrate 10 years of FTSE4Good, said that “It is crucial for investors to encourage and support long-term thinking in the companies in which they invest. To facilitate this there is a great need for a focus on broader corporate performance, rather than a narrow focus on near term financials. Environmental, social and governance considerations are an important part of this.”
Joanne Segars, Chief Executive of the NAPF, also speaking at the FTSE event tonight welcomed the launch of the FTSE4Good ESG Ratings “Pension funds naturally have a long-term focus. With the introduction of the Stewardship Code this is highly topical as there is a real need for good data such as this, to use in engagement and dialogue with investee companies.”
Highest scoring companies in accordance with FTSE4Good ESG Ratings – Global*
Region |
Constituent name |
Country |
Supersector |
Overall Rating |
Global |
Aviva |
UK |
Insurance |
5 |
Global |
Bank Hapoalim |
ISR |
Banks |
5 |
Global |
Vivendi |
FRA |
Media |
5 |
Global |
Westpac Banking Corp |
AU |
Banks |
5 |
Global |
ABB |
SWIT |
Industrial Goods & Services |
4.9 |
Global |
BT Group |
UK |
Telecommunications |
4.8 |
Global |
Capita Group |
UK |
Industrial Goods & Services |
4.8 |
Global |
Diageo |
UK |
Food & Beverage |
4.8 |
Global |
Insurance Australia Group |
AU |
Insurance |
4.8 |
Global |
Koninklijke Philips Electronic |
NETH |
Personal & Household Goods |
4.8 |
Global |
Nokia |
FIN |
Technology |
4.8 |
Global |
Norsk Hydro |
NOR |
Basic Resource |
4.8 |
Global |
RSA Insurance Group |
UK |
Insurance |
4.8 |
Countries with highest scoring averages in accordance with FTSE4Good ESG Ratings*
Country |
Average Overall ESG Rating |
Norway |
3.73 |
Netherlands |
3.59 |
Sweden |
3.57 |
Finland |
3.31 |
New Zealand |
3.29 |
France |
3.29 |
Spain |
3.24 |
UK |
3.18 |
Italy |
3.17 |
Switzerland |
3.11 |
Greece |
3.06 |
Denmark |
3.01 |
Belgium |
2.98 |
Germany |
2.98 |
Australia |
2.93 |
Portugal |
2.86 |
Canada |
2.81 |
Global Average |
2.76 |
Austria |
2.74 |
Ireland |
2.64 |
Japan |
2.63 |
USA |
2.62 |
Israel |
2.60 |
Korea |
2.31 |
Singapore |
1.91 |
Hong Kong |
1.34 |
Disclaimer
Companies on this list have been recently assessed ahead of publication. Cases where new information would lead to a higher assessment have been removed. © FTSE & EIRIS 2011. The FTSE4Good ESG Ratings are produced by FTSE International Limited (“FTSE”) and Ethical Investment Research Services Limited ("EIRIS") or their agents.
The FTSE4Good ESG Ratings are produced using a methodology which is explained in detail on the website (www.ftse.com). Registration on the website (which is free of charge) is required in order to obtain access to the methodology. Please note: use of other methodologies may produce different results. All rights in the FTSE4Good ESG Ratings vest in FTSE and EIRIS. “FTSE®” and “FTSE4GOOD®” are trade marks of the London Stock Exchange Plc and The Financial Times Limited and are used by FTSE under licence. “EIRIS” is a trade mark of EIRIS. Neither FTSE nor EIRIS nor their licensors shall be liable (including in negligence) for any loss or damage incurred by any person and arising out of the use of or reliance upon the FTSE4Good ESG Ratings. Publication or distribution of the FTSE4Good ESG Ratings or the use of the FTSE4Good ESG Ratings to create financial products requires a licence from FTSE. Any disclosure or use of the methodology for any purposes other than as a user of the FTSE4GOOD ESG Ratings for information in their published form will require a written licence from FTSE and EIRIS.
EIRIS collects information on companies from a range of sources and on an annual rolling basis provides companies with an opportunity to respond to the information that EIRIS holds on them.