Skip to main content

You are here

Blog Listing Page

Aligning values with investment choices

By: Tony Campos, director, ESG product management

The digital age has brought increased transparency and scrutiny to the way companies do business, giving investors a clearer view into company practices and sources of revenue. This has led to increased demand for tools that help investors align their values with their portfolios by selecting companies based on their impact on society and the environment. FTSE Russell, for example, recently launched a values-aligned index series, called the FTSE Global Choice Index Series, which is used by Vanguard in the US and Australia as the basis for new ETFs.

In order to effectively deliver values-aligned investment solutions, you have to start by translating a broad and relevant set of environmental, social and governance (ESG) issues into definable, measurable characteristics of a company. Indexes are ideal tools for this kind of ESG application, as they provide a rules-based, transparent method for defining and applying investor preferences. As such, ESG indexes have become a robust basis for investment products such as ETFs. 

While ESG screens are a good starting point for values-aligned investing, it is important to distinguish between the environmental and social impacts of a company’s products as well as its conduct. Our launch of the FTSE Global Choice Index Series aims to address both product and conduct ESG impacts—this series includes the FTSE Global All Cap ex US Choice Index, the FTSE US All Cap Choice Index and the FTSE Developed ex Australia ex Non-Renewable Energy/Vice Products/Weapons Index. In addition to the standard index family, clients can construct bespoke “Choice” indexes based on particular subsets of the screens that align with their values and sustainable investment objectives.

The index series excludes products from Non-Renewable Energy, Vice Products and Weapons categories:

The FTSE Global Choice Index Series then applies screens based on controversial company conduct and diversity practices. For example, companies with a history of controversy surrounding corruption, human rights or labor practices are excluded—as are companies without strong board diversity or equal opportunity practices.

There are many drivers of the increase in demand for values-aligned investment solutions, but one is certainly demographic changes and corresponding shifts in consumer preferences towards products that reflect the values of the individual. If the trend continues on its trajectory, we expect the FTSE Global Choice Index Series to grow and evolve in response. This can ensure investors have the tools they need to express their values in their portfolios with a thorough and thoughtful approach.   

 

--------------- 

© 2018 London Stock Exchange Group plc and its applicable group undertakings (the “LSE Group”). The LSE Group includes (1) FTSE International Limited (“FTSE”), (2) Frank Russell Company (“Russell”), (3) FTSE Global Debt Capital Markets Inc. and FTSE Global Debt Capital Markets Limited (together, “FTSE GDCM”), (4) MTSNext Limited (“MTSNext”), (5) Mergent, Inc. (“Mergent”), (6) FTSE Fixed Income LLC (“FTSE FI”) and (7) The Yield Book Inc (“YB”). All rights reserved.

FTSE Russell® is a trading name of FTSE, Russell, FTSE GDCM, MTS Next Limited, Mergent, FTSE FI and YB. “FTSE®”, “Russell®”, “FTSE Russell®”, “MTS®”, “FTSE4Good®”, “ICB®”, “Mergent®”, “WorldBIG®”, “USBIG®”, “EuroBIG®”, “AusBIG®”, “The Yield Book®”, and all other trademarks and service marks used herein (whether registered or unregistered) are trademarks and/or service marks owned or licensed by the applicable member of the LSE Group or their respective licensors and are owned, or used under licence, by FTSE, Russell, MTSNext, FTSE GDCM, Mergent, FTSE FI or YB. FTSE International Limited is authorised and regulated by the Financial Conduct Authority as a benchmark administrator.

All information is provided for information purposes only. All information and data contained in this publication is obtained by the LSE Group, from sources believed by it to be accurate and reliable. Because of the possibility of human and mechanical error as well as other factors, however, such information and data is provided "as is" without warranty of any kind. No member of the LSE Group nor their respective directors, officers, employees, partners or licensors make any claim, prediction, warranty or representation whatsoever, expressly or impliedly, either as to the accuracy, timeliness, completeness, merchantability of any information or of results to be obtained from the use of the FTSE Russell Indexes or the fitness or suitability of the FTSE Russell Indexes for any particular purpose to which they might be put. Any representation of historical data accessible through FTSE Russell Indexes is provided for information purposes only and is not a reliable indicator of future performance.

No responsibility or liability can be accepted by any member of the LSE Group nor their respective directors, officers, employees, partners or licensors for (a) any loss or damage in whole or in part caused by, resulting from, or relating to any error (negligent or otherwise) or other circumstance involved in procuring, collecting, compiling, interpreting, analysing, editing, transcribing, transmitting, communicating or delivering any such information or data or from use of this document or links to this document or (b) any direct, indirect, special, consequential or incidental damages whatsoever, even if any member of the LSE Group is advised in advance of the possibility of such damages, resulting from the use of, or inability to use, such information.

No member of the LSE Group nor their respective directors, officers, employees, partners or licensors provide investment advice and nothing contained in this document or accessible through FTSE Russell Indexes, including statistical data and industry reports, should be taken as constituting financial or investment advice or a financial promotion.

No part of this information may be reproduced, stored in a retrieval system or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without prior written permission of the applicable member of the LSE Group. Use and distribution of the LSE Group data requires a licence from FTSE, Russell, FTSE GDCM, MTSNext, Mergent, FTSE FI, YB and/or their respective licensors.

Blog Listing Page