Environment lobbyist group Friends of the Earth has given a cautious welcome to the FTSE4Good index which was launched today.
However, FOE is concerned about the environmental record of some of the companies on the UK list, and has concerns over the potential impact of the index on ethical investment.
The index includes Railtrack, ICI and BAA but excludes Royal Bank of Scotland, because it operates in Indonesia, and Tesco for lacking sufficient quantitative environmental data in company reports.
The FTSE4Good index will apply to the mainstream corporate sector, using best practice criteria based on company progress on environmental sustainability, relationships with stakeholders and support for human rights. The index will be initially focused on companies' management rather than their performance.
Simon McRae, investment campaigner at Friends of the Earth, said: The FTSE4Good index is a first step for mainstream fund managers in making the corporate sector more accountable. Management responsibility is important in assessing a company's social responsibility.
But it is vital that the index moves quickly beyond management systems to looking at companies’ significant ethical, environmental and social impacts. If it does this the index could be a real force for change.”
We are concerned that some of the companies listed have a controversial track-record on social responsibility. Including companies that deny access to cheap anti-AIDS drugs to developing countries, fund controversial road-building schemes and promote genetically modified food is not the best advert for the index.
We are also worried that the index will hit the socially responsible investment sector in this country by encouraging companies to settle for lower standards.”
FTSE said a greater percentage of UK companies qualify for inclusion in FTSE4Good than companies from any other country, reflecting the high standards of corporate social responsibility adopted by UK business. The index series, which aims to raise $1m for UNICEF in its first twelve months, will go live on July 31. A full list of qualifying companies for all FTSE4Good indices can be found at http://www.ftse4good.com. Companies, which do not qualify for the index today, can appeal to the Committee before August 10 and will be considered for inclusion following the first review in September. Mark Makepeace, FTSE chief executive said: “Increasingly, individuals and their pension funds seek to invest in socially responsible companies. FTSE4Good meets that demand and provides an independent measure for the SRI community.”
*Twelve global socially responsible investment research providers are to give investors standardised analysis on the socially responsible criteria used by 500 of the largest global corporations.
The Sustainable Investment Research International (SiRi) Group, is an alliance which includes AReSE, CentreInfo, Caring Company, SCORIS, Avanzi, Stock at Stake and Kinder Lydenberg Domini.
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