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The direct environmental and social impacts of FTSE are minimal in comparison to companies in other sectors. However as a major global index provider FTSE is in a powerful position to affect investment decisions and how companies are valued. This position has been used to influence markets to recognise better corporate environmental and social practice by launching a Socially Responsible Investment (SRI) index series called FTSE4Good.
The launch of the FTSE4Good series was also in response to growing investor demand for Socially Responsible Investment (SRI) indices and products. This growth is fuelled by investors seeking to capitalise on the long-term benefits of good corporate social responsibility (CSR) and sustainability performance, recognising that good CSR practice mitigates risk and goes hand in hand with good company management. The FTSE4Good series is designed to reflect the performance of socially responsible equities and facilitate investment in these companies. Investors are requiring more information as a basis for investment decisions and as Mark Makepeace put it "in the future companies will be increasingly measured on more than their financial success".
FTSE4Good excludes certain sectors including tobacco, arms and nuclear power. It then selects companies using social and environmental criteria in five categories:
This index family aims to be a first step in setting global standards for in the rapidly growing area of SRI.
By raising the selection criteria every year FTSE is a catalyst in the evolution and improvement of corporate practice in the areas of environmental and social responsibility.