The FTSE4Good Index Series is a series of
ethical investment
Ethics is the philosophy, philosophical study of Morality, moral phenomena. Also called moral philosophy, it investigates Normativity, normative questions about what people ought to do or which behavior is morally right. Its main branches inclu ...
stock market indices launched in 2001 by the
FTSE Group
FTSE International Limited trading as FTSE Russell ( "Footsie") is a British provider of stock market index, stock market indices and associated data services, wholly owned by the London Stock Exchange (LSE) and operating from premises in Canary ...
which reports on the performance of companies which demonstrate "strong
Environmental, Social and Governance practices". A number of
stock market indices
In finance, a stock index, or stock market index, is an index that measures the performance of a stock market, or of a subset of a stock market. It helps investors compare current stock price levels with past prices to calculate market perfor ...
are available, for example covering UK shares, US shares, European markets and Japan, with inclusion based on a range of
corporate social responsibility
Corporate social responsibility (CSR) or corporate social impact is a form of international private business industry self-regulation, self-regulation which aims to contribute to societal goals of a philanthropy, philanthropic, activist, or chari ...
criteria. Research for the indices is supported by the
Ethical Investment Research Services (EIRIS). The index excludes companies due to their involvement in tobacco production, weapons, or coal power industry and rates companies for inclusion based
environmental sustainability
Sustainability is a social goal for people to co-exist on Earth over a long period of time. Definitions of this term are disputed and have varied with literature, context, and time. Sustainability usually has three dimensions (or pillars): env ...
, relationships with stakeholders, attitudes to human rights, supply chain labour standards and the countering of bribery.
[Collison, D. J., Cobb, G., Power, D. M. and Stevenson, L. A. (2008), "The financial performance of the FTSE4Good indices". ''Corporate Social Responsibility and Environmental Management'', 15: 14–28. .]
The index series is published by
FTSE Russell
FTSE Russell is a subsidiary of London Stock Exchange Group (LSEG) that produces, maintains, licenses, and markets stock market indices. The division is notable for the FTSE 100 Index in the UK and the Russell 2000 Index in the US, among others. ...
.
According to an
event study
An event study is a statistical and econometric method to assess the impact of events on outcome variables. The event is also framed as a "treatment".
As the event methodology can be used to elicit the effects of any type of event on the directio ...
reported in 2007, it was uncertain whether inclusion in or exclusion from the index effectively incentivised the affected companies to change their behaviour in regards to social responsibility. Curran and Moran, who undertook the study, found that the movements in
share price
A share price is the price of a single share of a number of saleable equity shares of a company.
In layman's terms, the stock price is the highest amount someone is willing to pay for the stock, or the lowest amount that it can be bought for.
B ...
s which followed FTSE4Good announcements were not
significant in a statistical sense.
[M. Martin Curran, Dominic Moran (2007)]
"Impact of the FTSE4Good Index on firm price: An event study"
''Journal of Environmental Management'', Volume 82, Issue 4, March 2007, pp. 529-53. . As to the financial performance for investors, there is no evidence that a portfolio that is subject to ethical criteria performs significantly differently compared to their unrestricted equivalent.
FTSE4Good All-World Index
The FTSE4Good All-World Index contains 1713 companies, representing 47 countries. Compared to the
FTSE All-World index, Pakistan and Iceland are the only countries no longer represented. Japan is the country with the biggest gain in weighting, the USA is the country with the biggest loss in weighting.
The
ICB breakdown is shown here- compared to the FTSE All-World index, technology is overrepresented by 7% and consumer discretionary is underrepresented by 6%, with all other sectors being within ±1.5%.
[FTSE4Good All-World Index datasheet, 20 May 2024] Consumer staples (the sector normally containing alcohol and tobacco), as well as industrial goods and services (containing defence) and energy (containing oil, gas and coal) all have therefore the same weighting as the broader index.
Top 10 Constituents by index weight
See also
*
Dow Jones Sustainability Indices
The Dow Jones Sustainability Indices (DJSI) launched in 1999, are a family of indices evaluating the sustainability performance of thousands of companies trading publicly, operated under a strategic partnership between S&P Dow Jones Indices and Ro ...
*
MSCI KLD 400 Social Index
The MSCI KLD 400 Social Index was launched in 1990 and is designed to help socially conscious investors weigh social and environmental factors in their investment choices.
It was founded by KLD's Amy Domini as the Domini 400 Social Index.
The M ...
References
External links
FTSE4Good Index Series
FTSE Group stock market indices
Ethical investment stock market indices
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