- Stewardship, Transition and Engagement Program (STEP) for Change initiative issued today alongside new detailed analysis on the size and scale of the Green Economy
- STEP Change to help drive better global standards in sustainable investment
- New tool for listed companies launched today to enable ESG comparisons against their peers
- Growing numbers of investors now routinely considering stewardship and sustainability themes as core investment priorities
- Green economy now represents 6% of the market capitalisation of global listed companies – approximately US$4 trillion
- Reaffirms FTSE Russell’s 15+ year commitment to promoting sustainable investment
FTSE Russell, the global index, analytics and data provider, today launches STEP Change, its Stewardship, Transition and Engagement Program initiative, which aims to help drive better global standards in sustainable investment. By building ESG into core indexes and benchmarks, investors can drive stewardship and catalyse market wide improvements. Separately, FTSE Russell has also published the first of its annual reports tracking investment trends in the transition to a green economy. Both reports reflect the growing interest from the global investment community to incorporate Environmental, Social and Governance (ESG) factors as a core part of both their investment and stewardship approaches; and that integration into passive strategies can support these objectives.
The STEP Change report provides an in-depth review of FTSE Russell’s approach to stewardship, promoting transparent ESG methodologies and assessments. These assist asset owners and asset managers in their investment decisions but also help companies measure their own performance against their peers.
Mark Makepeace, CEO of FTSE Russell, said:
“Increasingly, ESG performance criteria, factors and risks are central to the everyday activities of those working in finance. FTSE Russell is committed to providing an objective framework to further this trend, by developing a comprehensive dataset based on transparent methodologies and by contributing to the formation of global standards.”
Launched in 2016, FTSE Russell’s green revenues data model provides a framework aimed at tracking the transition to a green economy. FTSE Russell has taken a broad view of the green economy aiming to capture products and services in renewable and alternative energy, energy efficiency, water and water and pollution. They are analysed based on their impact on climate change mitigation and adaptation, water, resource use, pollution and agricultural efficiency. In the first annual report, FTSE Russell calculates that approximately six per cent of the global listed equity market is derived from the green economy*. This is a significant investment opportunity representing almost US$4 trillion in market capitalisation**. The report outlines how, over the last five years, the green economy, as a proportion of equity markets, has grown while the ICB’s Oil and Gas Supersector has declined. The two are now equally sized at around six per cent of equity markets***.
There are approximately 3,000 global listed companies with exposure to the green economy. This number has risen by approximately 20 per cent since 2009 and covers 30 percent of global listed market capitalisation. As a substantial and growing market sector the green economy provides a significant opportunity for investors. If it continues at its current trajectory, it could represent seven per cent of global market capitalisation by 2030. If green investment accelerates to c. $90 trillion then it could reach ten per cent of global market capitalisation, similar in size to global health care.
Jack Ehnes, Chief Executive Officer of CalSTRS and Chairman of the FTSE Environmental Markets Committee said:
“The ability to track industrial, macroeconomic trends using quantifiable measures is crucial for institutional investors. FTSE Russell’s green revenues data model provides such a framework giving us the ability to measure and understand the transition to a green economy both at a company and at a portfolio level.”
Helen Wildsmith, Stewardship Director – Climate Change CCLA & Deputy Chair, FTSE Russell ESG Advisory Committee:
“Environmental, Social and Governance factors are increasingly becoming a core component to investment strategies and corporate engagement undertaken by institutional investors such as ourselves. FTSE4Good and the ESG Ratings are helping to improve market standards, promoting greater disclosure and transparency, and catalysing better sustainability performance among global firms as the transition to a green and sustainable economy continues to gain momentum.”
Link to the reports:
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* Sum of investable market capitalisation of green revenue companies, weighted by their green revenues percentage divided by the total market capitalisation of the FTSE Global All Cap Index
** Sum of investable market capitalisation of green revenue companies, weighted by their green revenues percentage
*** As reflected by the FTSE Global All Cap Index
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Notes to editors:
About FTSE Russell:
FTSE Russell is a leading global provider creating and managing a wide range of indexes, data and analytic solutions to meet client needs across asset classes, style and strategies. Covering 98% of the investable market, FTSE Russell indexes offer a true picture of global markets, combined with the specialist knowledge gained from developing local benchmarks around the world.
FTSE Russell index expertise and products are used extensively by institutional and retail investors globally. More than $15 trillion is currently benchmarked to FTSE Russell indexes. For over 30 years, leading asset owners, asset managers, ETF providers and investment banks have chosen FTSE Russell indexes to benchmark their investment performance and create investment funds, ETFs, structured products and index-based derivatives. FTSE Russell indexes also provide clients with tools for asset allocation, investment strategy analysis and risk management.
A core set of universal principles guides FTSE Russell index design and management: a transparent rules-based methodology is informed by independent committees of leading market participants. FTSE Russell is focused on index innovation and customer partnership applying the highest industry standards and embracing the IOSCO Principles. FTSE Russell is wholly owned by the London Stock Exchange Group.
For more information, visit www.ftserussell.com.
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