June 16, 2021

208 FTSE4Good constituents at risk of deletion after implementation of new climate performance standards

  • 208 companies, over 10% of the FTSE4Good All World have 12 months to improve climate performance or be deleted from FTSE4Good indexes
  • FTSE Russell has utilised the Transition Pathway Initiative (TPI) Climate Change Scores to make the assessments
  • Tougher Score requirements set for most carbon intensive industries

FTSE Russell, the global index, data and analytics provider, has identified 208 existing constituents of the FTSE4Good All World that have failed to meet new climate performance standards first introduced at the FTSE4Good 8th June 2021 semi-annual index review.

The changes, which also set minimum climate scores for FTSE4Good index inclusion, give constituents until the June 2022 semi-annual index review to meet the required standard or be deleted from FTSE4Good Index Series. Of the 208 companies at risk of deletion,105 are from higher-emission sectors.

FTSE Russell has utilised Transition Pathway Initiative’s (TPI) innovative methodology for analysing the climate performance of listed companies to determine the Climate Change Score. Thresholds are determined by FTSE Russell’s classification of developed and emerging markets, as well by a company’s sub-sector classification, with the most carbon intensive sectors set higher standards. For further information on these thresholds please visit: https://research.ftserussell.com/products/downloads/FTSE4Good_Index_Series_Ground_Rules.pdf

The changes to the methodology also include aligning the Climate Theme of FTSE Russell’s ESG Ratings product with TPI. ESG Ratings scores are determined using over 300 individual indicators across 14 themes.

In July 2020, FTSE Russell issued a market consultation on whether to revise its climate standards for the FTSE4Good index series in recognition of the growing importance of climate considerations in ESG indexes. Respondents were overwhelmingly supportive of the proposed enhancements to the existing Climate Change theme within FTSE Russell’s ESG Ratings.

These new climate requirements apply to all indexes within the FTSE4Good index series family, including the FTSE Blossom Japan index, FTSE4Good TIP Taiwan ESG Index and FTSE4Good Bursa Malaysia Index. Multiple Exchange Traded Funds (ETFs) utilise FTSE4Good Indexes, including funds managed by LGIM, Royal London and Japanese Government Pension Investment Fund (GPIF).

The FTSE4Good Index Series is designed to measure the performance of companies demonstrating strong Environmental, Social and Governance (ESG) practices. Transparent management and clearly-defined ESG criteria make FTSE4Good indexes suitable tools to be used by a wide variety of market participants when creating or assessing sustainable investment products.

The Transition Pathway Initiative (TPI) is a global initiative led by asset owners and supported by asset managers, aimed at investors to help assess companies’ preparedness for the transition to a low-carbon economy. FTSE Russell has been the data provider for the TPI since 2017.

Arne Staal, CEO, FTSE Russell comments:
“These tougher climate requirements reflect a groundswell of investor demands for companies to develop credible climate transition strategies and emission reduction targets. The introduction of the TPI score will impact all companies but set the highest hurdles for those in the most carbon-intense industries. Over the next 12 months, we will work closely with constituents at risk of deletion to ensure they understand what is required to retain index membership. It has been 20 years since the launch of FTSE4Good, which has proven to be a leading ESG benchmark family around the world, with a proven track record of driving improvements in corporate standards and environmental, social and governance performance.”

Chad Rakvin, Global Head of Index Funds, Legal & General Investment Management (LGIM), added:
"We have been managing FTSE4Good benchmarks for over 15 years on behalf of our clients. The industry has moved very fast with respect to the integration of more advanced metrics and best thinking in terms of index construction. Given our support as a Research Funding Partner of the Transition Pathway Initiative (TPI) and our experience in working with FTSE Russell to bring the TPI scoring frameworks into one of our flagship Future World Funds, we are delighted to see this evolution of the FTSE4Good series. We look forward to tackling the ongoing challenges our clients face by equipping them with the right tools to meet their investment, climate, and broad ESG objectives.”

Oliver Mann/ Lucie Holloway
+44 (0)20 7797 1222
newsroom@lseg.com

About FTSE Russell

FTSE Russell is a global index leader that provides innovative benchmarking, analytics and data solutions for investors worldwide. FTSE Russell calculates thousands of indexes that measure and benchmark markets and asset classes in more than 70 countries, covering 98% of the investable market globally. 

FTSE Russell index expertise and products are used extensively by institutional and retail investors globally. Approximately $16 trillion is currently benchmarked to FTSE Russell indexes. For over 30 years, leading asset owners, asset managers, ETF providers and investment banks have chosen FTSE Russell indexes to benchmark their investment performance and create ETFs, structured products and index-based derivatives. 

A core set of universal principles guides FTSE Russell index design and management: a transparent rules-based methodology is informed by independent committees of leading market participants. FTSE Russell is focused on applying the highest industry standards in index design and governance and embraces the IOSCO Principles. FTSE Russell is also focused on index innovation and customer partnerships as it seeks to enhance the breadth, depth and reach of its offering. 

FTSE Russell is wholly owned by London Stock Exchange Group. 

For more information, visit www.ftserussell.com.

© 2021 London Stock Exchange Group plc and its applicable group undertakings (the “LSE Group”). The LSE Group includes (1) FTSE International Limited (“FTSE”), (2) Frank Russell Company (“Russell”), (3) FTSE Global Debt Capital Markets Inc. and FTSE Global Debt Capital Markets Limited (together, “FTSE Canada”), (4) FTSE Fixed Income Europe Limited (“FTSE FI Europe”), (5) FTSE Fixed Income LLC (“FTSE FI”), (6) The Yield Book Inc (“YB”) and (7) Beyond Ratings S.A.S. (“BR”). All rights reserved.

FTSE Russell® is a trading name of FTSE, Russell, FTSE Canada, FTSE FI, FTSE FI Europe, YB and BR. “FTSE®”, “Russell®”, “FTSE Russell®”, “FTSE4Good®”, “ICB®”, “The Yield Book®”, “Beyond Ratings®” and all other trademarks and service marks used herein (whether registered or unregistered) are trademarks and/or service marks owned or licensed by the applicable member of the LSE Group or their respective licensors and are owned, or used under licence, by FTSE, Russell, FTSE Canada, FTSE FI, FTSE FI Europe, YB or BR. FTSE International Limited is authorised and regulated by the Financial Conduct Authority as a benchmark administrator.

All information is provided for information purposes only. All information and data contained in this publication is obtained by the LSE Group, from sources believed by it to be accurate and reliable. Because of the possibility of human and mechanical error as well as other factors, however, such information and data is provided "as is" without warranty of any kind. No member of the LSE Group nor their respective directors, officers, employees, partners or licensors make any claim, prediction, warranty or representation whatsoever, expressly or impliedly, either as to the accuracy, timeliness, completeness, merchantability of any information or of results to be obtained from the use of FTSE Russell products, including but not limited to indexes, data and analytics, or the fitness or suitability of the FTSE Russell products for any particular purpose to which they might be put. Any representation of historical data accessible through FTSE Russell products is provided for information purposes only and is not a reliable indicator of future performance.

No responsibility or liability can be accepted by any member of the LSE Group nor their respective directors, officers, employees, partners or licensors for (a) any loss or damage in whole or in part caused by, resulting from, or relating to any error (negligent or otherwise) or other circumstance involved in procuring, collecting, compiling, interpreting, analysing, editing, transcribing, transmitting, communicating or delivering any such information or data or from use of this document or links to this document or (b) any direct, indirect, special, consequential or incidental damages whatsoever, even if any member of the LSE Group is advised in advance of the possibility of such damages, resulting from the use of, or inability to use, such information.

No member of the LSE Group nor their respective directors, officers, employees, partners or licensors provide investment advice and nothing in this document should be taken as constituting financial or investment advice. No member of the LSE Group nor their respective directors, officers, employees, partners or licensors make any representation regarding the advisability of investing in any asset or whether such investment creates any legal or compliance risks for the investor. A decision to invest in any such asset should not be made in reliance on any information herein. Indexes cannot be invested in directly. Inclusion of an asset in an index is not a recommendation to buy, sell or hold that asset nor confirmation that any particular investor may lawfully buy, sell or hold the asset or an index containing the asset. The general information contained in this publication should not be acted upon without obtaining specific legal, tax, and investment advice from a licensed professional.

Past performance is no guarantee of future results. Charts and graphs are provided for illustrative purposes only. Index returns shown may not represent the results of the actual trading of investable assets. Certain returns shown may reflect back-tested performance. All performance presented prior to the index inception date is back-tested performance. Back-tested performance is not actual performance, but is hypothetical. The back-test calculations are based on the same methodology that was in effect when the index was officially launched. However, back-tested data may reflect the application of the index methodology with the benefit of hindsight, and the historic calculations of an index may change from month to month based on revisions to the underlying economic data used in the calculation of the index.

This document may contain forward-looking assessments. These are based upon a number of assumptions concerning future conditions that ultimately may prove to be inaccurate. Such forward-looking assessments are subject to risks and uncertainties and may be affected by various factors that may cause actual results to differ materially. No member of the LSE Group nor their licensors assume any duty to and do not undertake to update forward-looking assessments.

No part of this information may be reproduced, stored in a retrieval system or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without prior written permission of the applicable member of the LSE Group. Use and distribution of the LSE Group data requires a licence from FTSE, Russell, FTSE Canada, FTSE FI, FTSE FI Europe, YB, BR and/or their respective licensors.