Index provider says that environmental, social and governance factors will become more prevalent in investment analysis, decision-making and stewardship.
A decade after the launch of the FTSE4Good Index Series, FTSE Group has launched a new FTSE4Good ratings system that is designed to measure environmental, social and governance (ESG) factors.
FTSE Group claimed this new data service provides a comprehensive, transparent and objective system to measure ESG practices of over 2,300 public companies worldwide.
The company added that there is an increasing awareness that ESG factors are an important component in understanding corporate risks and performance and in the achievement of long-term, sustainable investment returns.
In the decade ahead the integration of ESG factors into investment analysis, decision-making and stewardship will become more prevalent, it continued.
The introduction of the ratings system builds on the launch in recent years of guidance and principles initiatives by international organisations such as the United Nations.
Globally, 227 asset owners and 496 asset managers have signed up to the United Nations Principles for Responsible Investment (PRI), committing them to integrating ESG considerations into their investment and stewardship approaches.
Additionally, the introduction of the Stewardship code in the UK has been credited as highlighting the importance of good stewardship and engagement with investee companies.
The FTSE4Good ESG Ratings will provide institutional investors with a flexible and granular scoring model which will enable them to understand a company’s ESG practices in multiple dimensions;
The FTSE4Good ESG Ratings criteria are publicly available and follow a defined methodology and rules.
They are overseen by an independent committee made up of experts from the investment community, academia, the business community, unions and NGOs. Company ratings are re-assessed twice a year by leading research provider, EIRIS.
Mark Makepeace, chief executive of the FTSE Group, said: "The new ratings service provides an easy to use and objective measure of corporate ESG practice and risk.
"Today we are also highlighting those companies that, based on our Ratings, have leading ESG practices."
Source: ftadviser.com
