UK companies are leaders in the new socially responsible investment index

The new FTSE4Good index, which will go live on 31 July, consists of companies which come up to certain standards on environmental sustainability and human rights, with owners and operators of nuclear power stations automatically excluded, as are tobacco and weapons producers. The index is designed to provide a tool for investors with which to track the performance of companies with high standards of corporate social responsibility in the UK, European, US and global markets against a comparable benchmark. Companies in the new FTSE4Good UK 50 index – the largest 50 companies – have outperformed the FTSE 100 by 15% over the last five years, says FTSE.

“The creation of FTSE4Good means that socially responsible investment has now moved into the mainstream,” said Mark Makepeace, FTSE Chief Executive. “Increasingly, individuals and their pension funds seek to invest in socially responsible companies. FTSE4Good meets that demand and provides an independent measure for the SRI community.”

As far as environmental issues are concerned, companies are automatically included in the list unless they are operating in an area with a potential to affect the environment, in which case they are assessed for their environmental policies and commitments, including their environmental management systems, and their environmental reports for the last three years. One prominent UK company to have failed to reach these standards, and so has been excluded from the list, is the retailer Tesco. Supermarkets are classified by the Ethical Investment Research Service (EIRIS), the organisation which compiled the indices, as having the potential for a high environmental impact, an EIRIS spokesperson told edie.

Companies operating in countries with poor human rights also have to reach certain standards, including a specific policy statement on human rights, and must have signed up to human rights initiatives, such as the Voluntary Principles on Security and Human Rights.

“The launch of the FTSE4Good indices is a sure sign of the growth of interest in social and environmental performance as a part of investment decision-making, not least because fund managers and analysts are becoming aware of potential links between such factors and financial performance,” said Peter Webster, Executive Director of EIRIS.

The top five companies in the FTSE4Good Global index are: Microsoft, AOL Time Warner, Intel, BP and GlaxoSmithKline. Energy companies figure strongly in the FTSE4Good UK 50 index, with BP at number one, Shell Transport and Trading at number six, and Scottish Power at number 22.