London Stock Exchange Group celebrates 'Exploring Stewardship and the Transition to a Sustainable Economy'
FTSE Russell, the global index, analytics and data provider part of London Stock Exchange Group, today launches STEP Change, its Stewardship, Transition and Engagement Program initiative, which aims to help drive better global standards in sustainable investment and reaffirms FTSE Russell’s 15+ year commitment to promoting sustainable investment. Separately, FTSE Russell has also published the first of its annual reports tracking investment trends in the transition to a green economy.
Both reports reflect the growing interest from the global investment community to incorporate Environmental, Social and Governance (ESG) factors as a core part of both their investment and stewardship approaches; and that integration into passive strategies can support these objectives.
The STEP Change report in particular provides an in-depth review of FTSE Russell's approach to stewardship, promoting transparent ESG methodologies and assessments. These assist asset owners and asset managers in their investment decisions but also help companies measure their own performance against their peers.
Mark Makepeace, CEO of FTSE Russell, said:
"Increasingly, ESG performance criteria, factors and risks are central to the everyday activities of those working in finance. FTSE Russell is committed to providing an objective framework to further this trend, by developing a comprehensive dataset based on transparent methodologies and by contributing to the formation of global standards."
Jack Ehnes, Chief Executive Officer of CalSTRS and Chairman of the FTSE Environmental Markets Committee said:
"The ability to track industrial, macroeconomic trends using quantifiable measures is crucial for institutional investors. FTSE Russell’s green revenues data model provides such a framework giving us the ability to measure and understand the transition to a green economy both at a company and at a portfolio level."
Helen Wildsmith, Stewardship Director – Climate Change CCLA & Deputy Chair, FTSE Russell ESG Advisory Committee said:
"Environmental, Social and Governance factors are increasingly becoming a core component to investment strategies and corporate engagement undertaken by institutional investors such as ourselves. FTSE4Good and the ESG Ratings are helping to improve market standards, promoting greater disclosure and transparency, and catalysing better sustainability performance among global firms as the transition to a green and sustainable economy continues to gain momentum."
Launched in 2016, FTSE Russell's green revenues data model provides a framework aimed at tracking the transition to a green economy. FTSE Russell has taken a broad view of the green economy aiming to capture products and services in renewable and alternative energy, energy efficiency, water and water and pollution. They are analysed based on their impact on climate change mitigation and adaptation, water, resource use, pollution and agricultural efficiency. In the first annual report, FTSE Russell calculates that approximately six per cent of the global listed equity market is derived from the green economy*. This is a significant investment opportunity representing almost US$4 trillion in market capitalisation**. The report outlines how, over the last five years, the green economy, as a proportion of equity markets, has grown while the ICB’s Oil and Gas Supersector has declined. The two are now equally sized at around six per cent of equity markets***. There are approximately 3,000 global listed companies with exposure to the green economy. This number has risen by approximately 20 per cent since 2009 and covers 30 percent of global listed market capitalisation. As a substantial and growing market sector the green economy provides a significant opportunity for investors.
* Sum of investable market capitalisation of green revenue companies, weighted by their green revenues percentage divided by sum of all companies market capitalisation
** Sum of investable market capitalisation of green revenue companies, weighted by their green revenues percentage
*** As reflected by the FTSE Global All Cap