FTSE Russell has been developing sustainable investment index solutions across asset classes to suit the changing needs of investors and the regulatory landscape.
The subsidiary of the London Stock Exchange Group has developed sustainable investment indexes in listed equities, real estate and sovereign debt. It is helping investors calibrate indexes to achieve their ESG objectives.
Each year, FTSE Russell’s ESG analysts communicate with over 7,000 companies in 53 countries, conduct two-way dialogue with over 1,700 companies and are involved in a more detailed process of engagement with a few hundred companies.
A key example of engagement was demonstrated in June 2021, it said. The company identified 208 constituents of the FTSE4Good All World index who failed to meet its latest climate performance standards – over 10% of members. These companies were given one year to improve their standards or face deletion from the index.
In September, FTSE Russell launched the Russell US ESG Indexes to provide ESG equivalents of the Russell benchmarks. The new range, designed to integrate ESG into institutional-grade US equity indexes includes six indexes constructed using robust ESG criteria and the target exposure methodology ensures they closely match risk and return characteristics of the underlying benchmarks.
“The market is very dynamic, especially in passive investments, where clients are asking for more diversity in their benchmarks – for sustainability versions of the Russell US Index family, for example. We see a real opportunity for investors to shift assets from standard benchmarks to these new indexes,” said Sylvain Château, global head of SI product management at LSEG (owner of FTSE Russell).
In March, the Government Pension Investment Fund (GPIF) of Japan selected the newly created FTSE Blossom Japan Sector Relative Index for its latest ESG passive fund. The new index selects companies with higher ESG Ratings within each sector. The index facilitates ESG integration into the Japanese market by “supporting improved ESG outcomes [and] driving better corporate sustainability performance and practices” using FTSE ESG Ratings.
