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FTSE to launch four ethical indexes for fund managers

April 2001

Around half of the UK’s largest listed companies are expected to qualify for four new socially responsible investment (SRI) indexes to be launched by FTSE in June.

FTSE chief executive Mark Makepeace said: ‘We expect just less than half of the 800 or so FTSE All Share companies and around 60 per cent of the FTSE 100 to qualify’.

Names of companies that qualify would be announced next month.

The UK, US, Europe and world indexes, called FTSE4Good, are being developed with the Ethical Investment Research Service and the United Nations Children’s Fund (see editorial comment).

FTSE, a company jointly owned by the Financial Times and the London Stock Exchange, will license the indexes to fund managers wishing to enter the growing SRI market.

Close Fund Management, which has become the first licensee of the UK index, will launch a FTSE4Good UK Fund to track the UK index shortly after it goes live in June. Unicef will receive all the licensing fees from the fund. The European index will also begin operating in June, with the US and world indexes expected to be set up by the end of the year.

FTSE companies will be assessed according to their performance on criteria such as the environment, human rights and stakeholder relations.

An advisory committee chaired by Mervyn Pedelty, chairman of the Co-operative Bank, will decide which companies qualify.

FTSE said it had suggested tobacco and arms firms should be excluded, but the committee will have final say.

FTSE is aiming the indexes at pension funds, which it believes want to invest in SRI funds in the wake of the UK government’s new pension regulation requiring fund trustees to state their position on SRI.

Eiris said the decision to launch the indexes was a sign of the increasing popularity of SRI, with $4.7billion (£3.3bn) of SRI funds under management in the UK and around $16bn in Europe.

In September 1999, Dow Jones launched a Sustainability Group Index which now has more than a dozen licensees.




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