Nuclear firms may soon feature in FTSE4GoodApril 2009
FTSE4Good is paving the way for nuclear power companies to qualify for its socially responsible investment indices. Businesses in the nuclear industry are excluded at present from FTSE4Good, but criteria are being devised that will scrap the ban.
Will Oulton, FTSE4Good’s head of responsible investment, said the new approach results from a growing consensus that nuclear power might make a significant contribution to reducing carbon emissions.
He told EP: ‘In the light of the climate change debate, non-governmental organizations are shifting their positions and many of the SRI funds are now taking a view that in terms of climate change nuclear power is more acceptable than it’s ever been before. We’re reviewing the situation with a view to bringing in specific criteria. We’re expecting to make an announcement in November.’
FTSE4Good’s decision could eventually allow companies such as British Energy, E.ON, Iberdrola and RWE to enter its indices – and therefore the portfolios of asset managers that use FTSE4Good as a basis for their investments.
The index series has excluded tobacco, arms and nuclear power companies since it began in 2001, but has been suggesting a more relaxed policy on the nuclear sector for some time.
In 2005 it conducted a consultation that revealed that three-quarters of respondents felt it should re-examine whether nuclear power generators should be eligible. Then in early 2006 (EP7, issue 9, p1) it dropped restrictions on uranium mining companies, enabling businesses such as Anglo American, BHP Billiton and Rio Tinto to enter its indices – provided they meet criteria in areas such as reporting on employee exposure to radiation.
There is no suggestion yet that the bans on tobacco and arms companies are soon to go, but FTSE4Good has always said it wants eventually to replace all exclusions with tight criteria to ensure that companies in all sectors behave responsibly.
The nuclear decision is likely to be welcomed in some quarters but criticized in others. Many NGOs, including Friends of the Earth and Greenpeace, still take an anti-nuclear stance as they believe nuclear power is too risky and will divert funds from renewable energy sources such as solar and wind power.
Dirk Matten, chair in CSR at the Schulich School of Business in Toronto, told EP: 'Ultimately the question has to be what investors who orient their decisions around FTSE4Good want. If they think nuclear is still an unethical, "bad" technology it should not be included, period. In my personal view, nuclear power is still irresponsible because no industrial nation has found a safe way to leave the waste to future generations. The instrumentalisation of the nuclear option in the climate change debate obfuscates the search for the real solution: new efficiencies in green and renewable energy and new imperatives on changing our energy-intensive consumption and production patterns.'
In FTSE4Good’s latest semi-annual review of constituents, 23 companies were added and 16 removed. The more notable deletions were the US transport companies Union Pacific and Norfolk Southern, which failed on climate change criteria. French chemicals manufacturer Arkema and Japanese trading company Sumitomo both failed on human rights and climate change. German cosmetics company Beiersdorf was deleted for falling short on human rights, and the UK’s Millennium & Copthorne Hotels was failed on bribery.
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