FTSE launches eco ratings service
FTSE have launched a new ethical scoreboard. A decade after launching the FTSE4Good Index Series, the group launches a new service, FTSE4Good ESG Ratings. The new ratings service will measure 2,300 public companies worldwide on their environmental and social performance.
The FTSE Group launches an ethical ratings service, allowing investors to check the environmental and social performance of the firms they choose to invest in.
The FTSE4Good ESG Ratings, come a decade after the FTSE Group launched their FTSE4Good Index Series, and aims to respond to the growing inclusion of Environmental and Social Governance (ESG) into investment analysis.
Mark Makepeace, Chief Executive of the FTSE Group said: “With the launch of the FTSE4Good ESG Ratings we are building on 10 years of FTSE4Good index experience. The new Ratings service provides an easy to use and objective measure of corporate ESG practice and risk.”
The new service will provide a comprehensive, transparent and objective system to measure the ESG practices of over 2,300 public companies worldwide.
The scoreboard of companies will be based on their overall ESG rating, scored against a broad environmental, social and governance pillar and against six ESG criteria themes including environmental management and climate change.
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.
FTSE also used the schemes’ launch to release details of firms, assessed ahead of the launch, that scored particularly high under the new ESG Rating criteria. Leading companies were UK’s Aviva, Bank Hapoalim, Vivendi and Westpac Banking Corp, with other UK companies BT Group and Capita Group following closely behind.
The scheme has formed out of an increasing awareness of ESG factors when understanding the role of corporate risk and performance, in achieving long-term, sustainable investment returns.
FTSE believe in the coming decade ESG factors will be further integrated into investment analysis and decision-making. Globally, 227 asset owners and 496 asset managers have now signed up to the United Nations Principles for Responsible Investment (PRI); committing to integrate ESG considerations into their investment and stewardship approaches.
Vince Cable, Business Secretary, who attended the launch said: “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 to 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.”
The scoreboard criteria will be made publicly available and will be overseen by a committee consisting of experts from the investment community, academia, the business community, unions and NGOs. Company ratings will be re-assessed twice a year by research provider EIRIS.
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