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FTSE Group (“FTSE”), the award-winning global index provider, today announces changes following the March 2013 FTSE4Good Index Series and ESG[1] Ratings semi-annual Review.
The March semi-annual review sees 20 new additions to the FTSE4Good Index Series, from nine countries. The largest number of additions at this review is from the USA, contributing six companies. Representation of Asia-Pacific countries continues to rise, with three Japanese, two South Korean and one company from Hong Kong joining the index. Since March 2011 the number of South Korean companies has increased by over half with six companies being added to the original eleven in the index.
Four companies are being deleted from the index as they no longer meet the FTSE4Good criteria. More details on additions and deletions are available on FTSE’s website. The changes to the index will be effective after the close of markets on 15th March 2013.
FTSE communicates directly with companies to ensure they understand the criteria for FTSE4Good membership. The inclusion criteria span six ESG themes, including environmental management, mitigating climate change, human and labour rights, supply chain labour standards, countering bribery and corporate governance. In 2012, research from Edinburgh University showed that this company dialogue had led hundreds of companies globally to improve their environmental, social and governance practices. Analysis of the responses of over 1000 companies showed that the rate of improvement on ESG practices doubles when the company is in direct contact with FTSE regarding FTSE4Good criteria.[2] Further research carried out in 2013 at Edinburgh University shows that when investors engage directly with companies using FTSE’s ESG data the rate of improvement in corporate practices also increases. This study which was based on collaborative engagement by investors from Legal & General Investment Management, Scottish Widows Investment Partners, and CCLA acting as secretariat to the £12bn UK Church Investors Group, showed that engaged companies were significantly more likely to improve, over 50% did so relative to a control group where only 13% improved.
The FTSE4Good Index Series is designed to help investors integrate environmental, social and governance (ESG) factors into their investments. The indices identify companies that better manage ESG risks and are used as a basis for tracker funds, structured products and as a performance benchmark. The ESG Ratings are used by investors who wish to incorporate ESG factors into their investment decision making processes, or as a framework for corporate engagement and stewardship.
[1]ESG stands for environmental, social and governance.
[2]See Mackenzie et al (Nov 2011) at http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1966474
