- FTSE Russell launches new FTSE All-World Ex CW Climate Balanced Factor Index
- LGIM selects index to form basis of new Future World Fund
- HSBC Bank UK Pension Scheme selects Future World Fund as its equity default option in its DC scheme
- HSBC and LGIM input into design of this new “Smart Sustainability” index which combines smart beta approach with climate change considerations
- Constituent green revenues determined by FTSE Russell’s Green Revenues (LCE) data model
FTSE Russell, the global index provider, announces the creation of a new index, the FTSE All-World Ex CW Climate Balanced Factor Index. It is the first FTSE Russell index to combine a smart beta factor approach alongside climate change considerations building on FTSE Russell’s strong track record in ESG (Environmental, Social and Governance) benchmarks, data and analytics. The index incorporates a range of factor and sustainability parameters in the index design. The index has been chosen by Legal & General Investment Management (LGIM) for its new Future World Fund, which HSBC Bank UK Pension Scheme has selected for its equity default option, worth £1.85 billion, in its DC scheme.
The innovative index methodology tilts constituent weights to provide increased but balanced exposures to value, quality, low volatility and size factors. It then incorporates climate change considerations through three parameters; carbon efficiency, fossil fuel reserves and the green revenues of constituents, using FTSE Russell’s Green Revenues (LCE) data model. The transparent, rules-based construction reflects the performance of eligible securities from the FTSE All-World Index, excluding companies involved in manufacturing weapons banned under international treaties such as cluster munitions and land mines.
Chancellor of the Exchequer, Philip Hammond said:
“Three of Britain’s biggest companies have come together for the launch of this ground-breaking new fund, which is a testament to our status as the world’s leading financial centre. Our ability to continually innovate means we are well positioned to benefit from the opportunities a growing green finance industry presents”.
Mark Makepeace, CEO of FTSE Russell, said:
“This new ‘Smart Sustainability’ index, combining a smart beta approach with a focused set of sustainability parameters, represents a new and exciting approach for the integration of ESG into passive investment strategies, and sets a new standard for DC funds.”
Mark Zinkula, CEO of Legal & General Investment Management said:
“It is crucial that pension funds are able to offer their members better risk-adjusted returns while helping to manage climate risk. Our Future World Fund which combines a multi-factor approach with climate change considerations is aimed at doing just that.”
Mark Thompson, Chief Investment Officer at HSBC Bank UK Pension Scheme said:
“We believe this fund will offer our members a better risk adjusted return, incorporate some climate change protection and deliver improved company engagement. This is a mainstream fund, the new normal.”
London Stock Exchange Group is a pioneer in supporting the growing global green and sustainable financing movement, providing a comprehensive green and sustainable product offering.
Further information can be found online at our Global Sustainable Investment Centre.
