FTSE Group develops global ex Fossil Fuels Index Series
Global index provider FTSE Group has launched the FTSE Developed ex Fossil Fuels Index Series, a set of benchmark indices that excludes companies linked to exploration, ownership or extraction of fossil fuels.
This is leading the way to implementation of a total exclusion model for fossil fuel-linked stocks, so that excluded enterprises are removed entirely from the index series.
BlackRock, the world’s largest fund manager, intends to launch a solution that tracks FTSE’s new benchmark using seed capital from Natural Resources Defense Council (NRDC), a not-for profit with 1.4 million members that works to protect the world’s natural resources, public health and environment.
The index series has been designed with the close co-operation of BlackRock and NRDC.
The methodology behind the index series is based around three key exclusion criteria, is designed to be transparent, easy to understand, quantifiable and repeatable across FTSE’s Global Equity Index Series (GEIS) which covers approximately 7,400 companies that represent almost 98 per cent of global market capitalisation.
A company that satisfies the following conditions is excluded from the index series:
1. Classified as in the ICB subsectors - exploration & production, integrated oil & gas, coal mining and general mining; and either have
2. Revenues arising from coal mining and crude petroleum and natural gas exploration and production; or
3. Proved and probable (2P) reserves in coal, oil or gas based on the company’s published annual report and accounts.
Mark Makepeace (pictured), CEO of FTSE Group, says: “FTSE is delighted to work with BlackRock and NRDC on this ground-breaking index series. We are increasingly seeing demand from our clients for indices that reflect their overall business culture and values. Innovation is at the core of all our products and we are pleased to develop this global benchmark to implement total exclusion of companies linked to this theme.”
Richard Kushel, head of BlackRock’s strategic product management group, says: “We’re proud to work with two market leaders to offer our clients innovative investment options that appeal to their mission-driven goals. The scale of BlackRock’s Beta Strategies platform allows us to accommodate the varied needs of a diverse client base in an efficient, transparent manner and to consistently deliver benchmark performance.”
Frances Beinecke, president of the Natural Resources Defense Council, says: “This initiative is about creating the kind of world we want to leave for the next generation. We want to move toward a world that no longer relies on dirty energy that threatens our future, damages our communities and destabilises our climate. A fossil fuel-free future is where we see opportunity and promise, and that’s where NRDC wants to direct our financial resources.”
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