FTSE4GOOD is a series of ESG and SRI stock indexes launched by the Financial Times Stock Exchange-Russell Group (FTSE Group) in 2001. One of the primary purposes of the FTSED4GOOD index series is to evaluate companies in terms of corporate, social, and environmental governance (ESG) criteria. Within these criteria, there are many parameters such as environmental sustainability, non-discriminatory working environment and safety of the working environment, selection of supply chains, and a working environment that respects human rights. These parameters are created by following and updating market expectations and developing ESG criteria. The independent FTSE Russell ESG Advisory committee plays a role in the formation and oversight of the standards. We can say that many actors such as researchers, NGOs, government agencies, international organizations, and companies are represented in this committee.
WHAT ARE THE BASIC FUNCTIONS OF INDEXES?
The main motivations of companies to align themselves with FTSE4GOOD values are to announce that they have developed themselves in a way that can eliminate the risks that may arise today and in the future by adopting the ESG approach and attracting the attention of socially responsible investors. Socially responsible investing (SRI) has become a trend many investors follow today. We can briefly describe socially accountable investing as investors investing in companies that they believe support issues such as environmental governance, sustainability, human rights, and diversity. Especially with the announcement of the United Nations' responsible investment principles, the interest of many investors in the subject has increased. In this case, FTSE4GOOD lists suitable companies for socially responsible investors and acts as a bridge for these companies to meet with responsible investors.
Another benefit of the indices is to enable companies to be compared by creating listings based on geography. In this way, it allows companies to transform themselves by showing their competitive power. At the same time, the increase in competition for compliance with ESG criteria contributes to the access to universal ESG criteria in the world. Also, it contributes to the rise in awareness of this issue.
ESG-FOCUSED FTSE4GOOD INDICES
There is more than one ESG-focused index under the FTSE4GOOD index. Some of those;
FTSE4Good ASEAN 5 Index: Is designed for companies traded in ASEAN financial markets. It evaluates and lists these companies according to ESG criteria and corporate social responsibility studies.
FTSE4Good Developed Minimum Variance Index: The primary purpose of the index is to reduce the index variability by using the historical information of the companies. It is presented to market participants, offering potential improvements in risk and reward.
FTSE4Good Bursa Malaysia Index: The primary purpose of the index is to identify companies that comply with ESG criteria for Malaysian markets and to list Malaysian companies that produce notable corporate social responsibility projects.
FTSE4Good TIP Taiwan ESG Index: The Index was developed to measure the performance of companies on the Taiwan Stock Exchange that meet globally recognized ESG participation standards.
Finally, for the FTSE4GOOD index series, we can say that thanks to its broad scope and independent supervisory board, it carries out a transparent process and significantly impacts the ESG applications of the companies by measuring the ESG performances of hundreds of companies.
Author:
İrem Derya
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