UK - FTSE's socially responsible index, FTSE4GOOD is in talks with a number of weapons, tobacco and nuclear fuels company, following a decision to re-examine inclusion criteria.
But the move is already raising eyebrows among the fund management industry which is calling into question the whole FTSE4GOOD concept.
FTSE confirmed that talks have been held with British American Tobacco. BAE Systems, British Electric and General Electric have also been in correspondence with the index’s management committee.
But FTSE denied reports that any arrangements would be in place by the summer, or by year end, adding that adequate warning would be given but no inclusions were imminent.
FTSE declared its intentions to analyse the criteria for any initial exclusions in June last year, stating that “while the [current] approach is appropriate for today’s market, the committee has also undertaken to involve index criteria in line with broader SRI developments, and the improved availability of reliable SRI performance data. Each exclusion will be replaced by an individual and substantive set of performance criteria, which will begin in 2002.”
Criteria for admittance into the indices includes improved records on environmental, social, corporate governance and human rights issues.
But according to Toby Belsom, an SRI analyst at Morley Fund Management, FTSE has confused the issue and rendered the index “inappropriate” as a benchmark:
FTSE4GOOD should have done this right at the start. They are now confusing the picture and consumers will have a right to ask if it is an ethical index or not? We believe these indices are an inappropriate benchmark for SRI funds and would prefer our funds to be compared against traditional indices such as the FTSE All Share.”
He added: “Integrating social and environmental information into mainstream fund management decisions requires intensive research into sector specific issues such as child labour and the clothing sector, climate change and the oil industry or recycling policy and the waste management business - not a standard questionnaire.
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