Driving better standards in sustainable investment
Our approach to sustainability
FTSE Russell considers environmental, social and governance issues of critical importance to our business and to capital markets. As part of London Stock Exchange Group (LSEG), our sustainability strategy and policy is set out in the LSEG’s Sustainability Policy. LSEG’s approach is founded on two commitments; transforming the global financial ecosystem and transforming our operations and culture while supporting the wider community. We have six impact areas that direct our focus on all of our sustainability activities.
As we continue to expand around the world, we have taken steps to manage our business impacts and to conduct our activities in the wider community in a responsible way. For more information about our performance on Environmental, Social and Governance matters, download the LSEG’s Sustainability Report.
In February 2021, LSEG confirmed that it had become a signatory to the Business Ambition for 1.5C, and a member of the United Nations Climate Change ‘Race to Zero’. The Group’s ambitious, science-based targets to reduce emissions in alignment with the Paris Agreement have also been approved by the Science Based Targets initiative (SBTi).
Core to our strategy is ensuring that sustainability is aligned to our overarching business strategy and governance principles. Through our index and benchmarking services, we provide clients with the tools to enable them to make better informed investment decisions, and to help them understand and manage risk for themselves and society as a whole. Our clients increasingly require products and services to support the integration of (ESG) aspects into their investment decisions and stewardship approach. We remain at the forefront of developing products such as sustainability indexes, data and analytics.
In June 2019 LSEG acquired ownership of Beyond Ratings. Beyond Ratings is a highly regarded provider of smart data and analytics that enable ESG integration into fixed income, complementing traditional credit analysis. Combining FTSE Russell’s indexing capabilities with Beyond Ratings’ innovative climate risk assessments allows us to offer broader choice of ESG integration solutions across both equity and fixed income.
In 2018, FTSE Russell launched its Stewardship, Transition and Engagement Program for Change (STEP Change). We marked the launch with the program’s first report, 2018 STEP Change report. The initiative is about helping drive better global standards in sustainable investment. As a firm, we work with corporates, policymakers, NGOs and investors to improve disclosure and foster transparency for the long-term benefit of the market and ultimately the societies we all operate within.
We have dedicated ESG and Green Revenues business units, with expertise spanning European, North American and Asian markets. Members of these units play active roles in all major regional sustainable investment industry associations. As a founding signatory, FTSE Russell helped develop the United Nations-backed Principles for Responsible Investment. Having launched the FTSE4Good Index Series two decades ago, the team has expanded the Index Series, overseen ongoing enhancements to the standards applied and introduced new index families and ESG products.
Promoting future-oriented asset classes
Through our Environmental Markets indexes, such as the FTSE Environmental Opportunities Index, we help investors to identify and gain exposure to firms in seven environmental market sectors: renewable and alternative energy; energy efficiency; water infrastructure and technologies; pollution control; waste management and technologies; environmental support services; and food, agriculture and forestry.
Driving sustainable investment
FTSE Russell’s Sustainability indexes, data solutions and analytics help to promote global sustainability standards and enable market participants to integrate sustainability into their investments and support the transition to a low carbon economy.
- FTSE ESG Ratings
The FTSE ESG Ratings provide investors with a flexible and granular scoring model, enabling them to understand a company’s ESG practices in multiple dimensions and to integrate ESG considerations into investment decisions and stewardship approaches.
- FTSE Russell Green Revenues data model
The Green Revenues data model measures the green revenues of over 14,000 public companies, representing 98.5% of total global market capitalization. Revenues from a broad range of large, mid and small capitalization companies in 48 developed and emerging markets are mapped to 64 green subsectors, with FTSE Russell assigning each company in the model a Green Revenues factor, representing the ratio of its green revenues to its total revenues.
- Beyond Ratings’ Sovereign climate data
Beyond Ratings has designed Sovereign Climate KPIs, a unique methodology to assess the performance of investment portfolios with regards to climate exposure. This methodology is based on a series of exclusive metrics on carbon footprint, energy transition, and physical climate risks available for more than 170 countries and 10,000 corporates.
- FTSE4Good Index Series
FTSE Russell has played a pioneering role in developing ESG indexes through the FTSE4Good Index family, which comprises companies demonstrating strong ESG performance. With advice and direction from the independent FTSE4Good Advisory Committee, and supported by an evolving criteria platform and direct company communication program, FTSE4Good has had a significant and measurable impact on the behavior of companies worldwide while providing investors with a tool for benchmarking and tracking ESG-driven funds. The index family spans more than 15 benchmarks and tradable indexes covering different regions, including the FTSE Blossom Japan Index.
- FTSE Environmental Markets Index Series
Launched in 2008 in partnership with Impax Asset Management, this series is based around the FTSE Environmental Markets Classification System, which categorizes companies into seven sectors and 29 sub-sectors, according to the types of environmental products or services they provide. These include renewable and alternative energy, energy efficiency from enhanced energy storage to smart grid technology), pollution control, water technology and infrastructure, and waste and recycling technology.
- FTSE Climate Risk-Adjusted Government Bond Indexes
The FTSE Climate Risk-Adjusted Government Bond Index Series supports global fixed income investors to quantitatively incorporate climate considerations into government bond portfolios. The index series measures the performance of fixed-rate, local currency, investment-grade sovereign bonds in the FTSE World Government Bond Index (WGBI) or FTSE EMU Government Bond Index (EGBI) incorporating a tilting methodology that adjusts index weights according to each countries’ relative climate risk performance.
- FTSE TPI Climate Transition Index
The FTSE TPI Climate Transition Index in collaboration with the Transition Pathway Initiative and the Church of England Pensions Board was the first global index that enables passive funds to capture company alignment with climate transition. The Index combines FTSE Russell and TPI analysis on company exposure to five climate considerations: green revenues, fossil fuel reserves, carbon emissions, management quality and carbon performance assessments. FTSE Russell is a member of TPI contributing data, expertise and benchmark development.
- FTSE Smart Sustainability Index Series
Smart Sustainability is the combination of sustainability parameters and risk premia via factor exposure within a single index solution. It reflects the growing demand for the incorporation of both factors and Environmental, Social, and Governance (ESG) data into investment tools, including indexes. The Smart Sustainability index family reflects the performance of stocks with the application of a range of factor and sustainability adjustments, and includes the award-winning FTSE All-World ex CW Climate Balanced Factor Index.
- FTSE Global Choice Index Series
The FTSE Global Choice Index Series is a market cap-weighted series with a rules-based methodology for defining how the products and conduct of a company impact society and the environment. The underlying framework includes large, mid, and small securities across developed and emerging markets globally, with modular indexes available to target specific country markets. The result is a framework for applying robust and customizable values-based screens to a range of broad market indexes
- FTSE ex Fossil Fuels Index Series
Market participants are increasingly looking to manage carbon exposure in their investments and to reduce write-off or downward revaluation risks associated with stranded assets. Stranded assets are fossil fuel deposits that could become uneconomic to extract under certain regulatory responses to climate change. Launched in 2014, the FTSE ex Fossil Fuels Index Series is a capitalization-weighted index series designed to represent the performance of constituents after excluding companies that have certain revenue and/or reserve exposure to fossil fuels.
- FTSE Women on Boards Leadership Index Series
The Index Series is designed to integrate leadership in gender diversity into a broad market benchmark. These indexes increase exposure to companies based on the strength of their diversity leadership at the board level and how well they manage wider impacts on society.
- FTSE EPRA Nareit Green Indexes
The FTSE EPRA Nareit Green Indexes provide investors with a useful tool for integrating climate risk into their listed real estate portfolio. These indexes provide a sustainability-focused extension to the FTSE EPRA Nareit Global Real Estate Index Series, the world’s leading series of listed real estate benchmarks. The FTSE EPRA Nareit Green indexes weight constituents based on two sustainable investment measures; green building certification and energy usage, and follows the FTSE Global Factor Index Series methodology to address concerns about liquidity, capacity, diversification and turnover.
- Sovereign Climate analytics
The combination of Beyond Rating’s market leading climate and ESG data with Yield Book’s trusted fixed income analytics provide clients with a flexible and authoritative source for climate solutions in sovereign markets.