DEFINITION of FTSE4Good Index Series
FTSE4Good Index Series is a set of market capitalization-weighted indexes maintained by the FTSE Group (Financial Times Stock Exchange) to measure the performance of companies that meet globally recognized corporate responsibility standards. The FTSE4Good Index Series is designed to provide exposure to companies that manage their social and environmental risks, while also helping "ethical" or socially-conscious investors avoid companies that do not.
BREAKING DOWN FTSE4Good Index Series
Launched in 2001, the FTSE4Good Index Series is useful for ESG (Environmental, Social and Governance) investors for benchmarking and identifying individual companies that adhere to desired corporate practices. To be included in the FTSE4Good Indexes, companies must, for example, support human rights, have good relationships with the various stakeholders, make progress to become environmentally sustainable, ensure good labor standards not only for their own company but for companies that supply them as well, and fight bribery and corruption. An independent committee of experts, in consultations with NGOs (Non-Government Organizations), academics, government bodies and investors, develop the criteria and regularly update and review conformity to their ESG standards.
Companies automatically excluded from the index series are tobacco companies, manufacturers of nuclear weapon systems, manufacturers of whole weapons systems, utilities involved in producing electricity from nuclear power, and businesses involved in the mining or processing of uranium. Oil and gas companies are not dismissed out-of-hand; instead, they are evaluated based on their efforts to reduce production of fossil fuels and evolve their business into more environmentally-friendly operations.
FTSE4 Good Index Series consists of six benchmark indexes covering major developed markets including the U.S., Japan, U.K., Australia and the EU. In addition, the series includes five tradable indexes for investors who want instant and cost-effective exposure to ESG companies, as they are colloquially known.
FTSE4Good Index Series Recognizes Nestle S.A.
In 2011 the committee made the decision to include Nestle for its responsible marketing of breast milk substitutes after determining that the Swiss food and beverage company met certain strict criteria. After the last review in 2017 by the committee, Nestle maintained its inclusion in the index series. This is a status that the company is proud of, and it serves as a signal to consumers and investors alike that the company can be trusted, at least in the eyes of the FTSE Group, to offer its milk formula to mothers and their babies in a responsible manner.