FTSE4Good raises bar for oil, gas and mining firmsMay 2003
Oil, gas and mining companies must begin reporting publicly on their human rights records from September 2003 to qualify for inclusion in the FTSE4Good index family.
FTSE Group, which runs the indices along socially responsible investment lines, will introduce the new requirement as part of a tightening of its criteria for the ‘global resource sector’.
From September this year, firms in this sector will have to show they are carrying out human rights impact and risk assessments, and will need to have published human rights policies and to have declared their commitment to respect International Labour Organization standards on issues such as equal opportunities and collective bargaining.
Additionally they will need to have made a ‘clear statement of support’ for the United Nations’ Universal Declaration of Human Rights, have guidelines for the use of armed security guards, and make reference to respect for the rights of indigenous peoples.
The criteria also stipulate that companies must provide training for employees on human rights, consult with local stakeholders, and show they have ‘procedures to remedy any non-compliance’ with the UN declaration.
Similar, though not identical, criteria will be applied from March 2004 to companies outside the oil, gas and mining sectors that are deemed to have a significant presence in 27 countries regarded by FTSE as ‘high risk’ as far as human rights are concerned (see box). ‘Significant presence’ is defined as having more than 1000 employees or £100million ($158m) in turnover or assets in the countries concerned.
The list of 27 has been drawn up by the Ethical Investment Research Service, which provides research for the indices and will monitor whether companies are complying with the criteria.
All other companies outside these two categories will have to fulfil more stringent human rights criteria ‘over time’, with a timetable expected from FTSE4Good in March 2004.
FTSE developed the criteria in consultation with around 200 corporations, fund managers, NGOs and private investors.
Since the launch of the FTSE4Good indices in July 2001, it has been criticized for setting the entry criteria too low. But it has always said it would tighten them over time, and last year revised its environmental requirements.
Will Oulton, deputy chief executive of the FTSE Group, said: ‘We’ve seen a very positive reaction to the higher environmental standards and I’m sure we’re going to see a similar reaction on human rights.’
He claimed 76 per cent of existing constituents in the UK index have improved or are in the process of improving their environmental disclosure following the changes.
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