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Industry Classification Benchmark: Structural enhancements to the industry categorization framework

An industry classification system allows investors and other market participants to segment and evaluate the global economy in a systematic and holistic way. It provides a standardized framework to research individual areas of the economy, conduct peer group analysis and classify companies on both a top-down and bottom-up basis. An industry classification system allows users to assign individual companies to both aggregate industry groupings and, with increasing levels of detail, to sectors and subsectors that reflect companies’ specialist areas of business.

A well-constructed classification system can also be used to track the performance and evolution of industries, supersectors, sectors, subsectors and companies over time. Therefore, as industries evolve and new forms of economic activity rise to prominence, a classification scheme needs to adapt to reflect those changes.

In 2019, the Industry Classification Benchmark (ICB®) will be enhanced to ensure that its company categorization structure meets the needs of today’s investment professionals.

Following the completion of the “FTSE Russell Client Consultation for Integrating Industry Classification Structures” and based on additional research and client feedback, effective July 1, 2019, the ICB structure will be improved and expanded to include:

  • 11 Industries
  • 20 Supersectors
  • 45 Sectors
  • 173 Subsectors
To help clients transition to the new ICB structure, the legacy ICB Universe product will continue to be provided to clients in parallel throughout 2019. And the discontinuation of Russell Global Sectors (RGS) has been extended to later in 2019. In this FTSE Russell Insights we describe the enhancements to the ICB framework, outline the rationale for key changes to its structure and summarize the impact of the proposed changes.
 

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