Driving better standards in sustainable investment
Our approach to corporate sustainability
FTSE Russell considers environmental, social and governance issues of critical importantance to our business and to capital markets. As part of London Stock Exchange Group (LSEG), our corporate sustainability (CS) strategy and policy is set out in the London Stock Exchange Group’s Corporate Sustainability Strategy. LSEG’s approach is founded on four pillars, which are the areas where we believe we can have the most impact and add the most value. These pillars are integral to how we operate as a business: Our Markets, Our Services, Our People and Our Communities. FTSE Russell’s Chief Executive Mark Makepeace chairs the LSEG CS Committee as well as the Our Services CS Pillar.
|Our CS Approach
Our CS strategy is then executed through the following 4 pillars
Funding sustainable growth and building long-term economic prosperity
Providing transparent market operations and reliable information to enable informed investment decisions
Embracing our diverse and global talent to fulfil long-term ambitions
Empowering people, enriching communities
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 CS performance on Environmental, Social and Governance matters, download the London Stock Exchange Group’s Corporate Responsibility Report.
Core to our strategy is ensuring that CS 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 environmental, social and governance (ESG) aspects into their investment decisions and stewardship approach. We remain at the forefront of developing products such as ESG indexes and analytics.
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 nearly 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.
Enabling sustainable investment
FTSE Russell’s ESG indexes and Ratings service help to promote global CS standards and enable market participants to integrate sustainability into their investments and support the transition to a low carbon economy.
- 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 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 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 Russell Green Revenues data model and Index Series
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 60 green industrial 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.
- 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 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.