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Paul hoff.
Paul hoff.
Paul hoff.
Paul hoff.
Paul hoff.
Paul hoff.
Paul hoff.
Paul hoff.
Paul hoff.
Paul hoff.
Paul hoff.
Paul hoff.
Paul hoff.
Paul hoff.
Paul hoff.
Paul hoff.
Paul hoff.
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Paul hoff.

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  • Thank you very much MarkMy name is David Harris, Director of Responsible Investment, where I am responsible for our RI services which includes not only FTSE4Good, but also FTSE EM –Impax, FTSE CDP Strategy indices – CDP & ENDS Carbon.FTSE has a dedicated Responsible Investment Unit, who have worked very hard in the run up to today; Jayn, Tony, Arisa, Stephanie and Vicky could you stand up. As there wont be time for questions please do find them in the networking later to find out more and ask questions. You can sit down again now.I am very excited to unveil both a new service, and the new motor that will sit behind the FTSE4Good indices, this is…. the FTSE4Good ESG Ratings System. ESG = env soc govBut before I explain what the ratings are and how they work., I should first address “why have we created this?”
  • The reason is demand.You can see here that assets globally that take a responsible investment approach have grown hugely over the last decade. Today its worth over 10 trillion dollars. To put that in context the global public equity market is worth around 40 trillion dollars. So it’s a big chunk of the market. We are extremely lucky to have Wolfgang Engshuber, the new Chairman of the UN backed PRI. They have played an important role in catalysing this. Large number’s of institutional investors are now looking to integrate environmental social and governance factors into the way they invest and need measurement systems and tools to do that.Since the launch of FTSE4Good we have had eight separate market consultations to help us develop criteria on issues ranging from nuclear power to supply chain labour stands to countering bribery. So we have been developing increasingly sophisticated criteria and methodology, together with our partners EIRIS. However until today it has only been used to provide a binary result, either a company is in or out of the index. But there is a wealth of data and information sitting behind this.At the same time our clients are asking us for more information. They are sometimes interested in some of the areas for example environment, others focused on countering bribery, some wish to use higher thresholds than use for the F4G index, others wish to use lower thresholds. They are also wanting using the data in different ways, for example:- Re-weighted indices where you use ESG factors, not to determine inclusion or non-inclusion, but to vary the constituent weights. BT is about to use a climate change tilted index we created for them. We are also seeing demand for blended indices use ESG data together with financial measures such as fundamental or risk factors. For ERAPF the French public pension scheme we created an index that combined ESG factors with a methodology based on sharpe rations t increase the returns to risk ratioSo these ratings offer our clients an objective and flexible data set. Let me explain how our clients will use this.
  • The reason is demand.You can see here that assets globally that take a responsible investment approach have grown hugely over the last decade. Today its worth over 10 trillion dollars. To put that in context the global public equity market is worth around 40 trillion dollars. So it’s a big chunk of the market. We are extremely lucky to have Wolfgang Engshuber, the new Chairman of the UN backed PRI. They have played an important role in catalysing this. Large number’s of institutional investors are now looking to integrate environmental social and governance factors into the way they invest and need measurement systems and tools to do that.Since the launch of FTSE4Good we have had eight separate market consultations to help us develop criteria on issues ranging from nuclear power to supply chain labour stands to countering bribery. So we have been developing increasingly sophisticated criteria and methodology, together with our partners EIRIS. However until today it has only been used to provide a binary result, either a company is in or out of the index. But there is a wealth of data and information sitting behind this.At the same time our clients are asking us for more information. They are sometimes interested in some of the areas for example environment, others focused on countering bribery, some wish to use higher thresholds than use for the F4G index, others wish to use lower thresholds. They are also wanting using the data in different ways, for example:- Re-weighted indices where you use ESG factors, not to determine inclusion or non-inclusion, but to vary the constituent weights. BT is about to use a climate change tilted index we created for them. We are also seeing demand for blended indices use ESG data together with financial measures such as fundamental or risk factors. For ERAPF the French public pension scheme we created an index that combined ESG factors with a methodology based on sharpe rations t increase the returns to risk ratioSo these ratings offer our clients an objective and flexible data set. Let me explain how our clients will use this.
  • The reason is demand.You can see here that assets globally that take a responsible investment approach have grown hugely over the last decade. Today its worth over 10 trillion dollars. To put that in context the global public equity market is worth around 40 trillion dollars. So it’s a big chunk of the market. We are extremely lucky to have Wolfgang Engshuber, the new Chairman of the UN backed PRI. They have played an important role in catalysing this. Large number’s of institutional investors are now looking to integrate environmental social and governance factors into the way they invest and need measurement systems and tools to do that.Since the launch of FTSE4Good we have had eight separate market consultations to help us develop criteria on issues ranging from nuclear power to supply chain labour stands to countering bribery. So we have been developing increasingly sophisticated criteria and methodology, together with our partners EIRIS. However until today it has only been used to provide a binary result, either a company is in or out of the index. But there is a wealth of data and information sitting behind this.At the same time our clients are asking us for more information. They are sometimes interested in some of the areas for example environment, others focused on countering bribery, some wish to use higher thresholds than use for the F4G index, others wish to use lower thresholds. They are also wanting using the data in different ways, for example:- Re-weighted indices where you use ESG factors, not to determine inclusion or non-inclusion, but to vary the constituent weights. BT is about to use a climate change tilted index we created for them. We are also seeing demand for blended indices use ESG data together with financial measures such as fundamental or risk factors. For ERAPF the French public pension scheme we created an index that combined ESG factors with a methodology based on sharpe rations t increase the returns to risk ratioSo these ratings offer our clients an objective and flexible data set. Let me explain how our they will be used.
  • Transcript

    • 1. ©FTSE International Limited 2011. ALL RIGHTS RESERVED. ANY INFORMATION REPRODUCED MAY ONLY BE DONE WITH FTSE’S PRIOR WRITTEN AGREEMENT.<br />Sustainable Indices<br />Paul Hoff FTSE Group<br />TBLI Conference, Tokyo<br />September 2011<br />Workshop 15 – Sustainability Indices<br />
    • 2. Contents<br /><ul><li>Introduction
    • 3. FTSE4Good
    • 4. The Selection Process
    • 5. The Engagement Process
    • 6. The Last 10 Years
    • 7. Growth of ESG Investment
    • 8. FTSE4Good ESG Ratings
    • 9. Structure
    • 10. Scoring
    • 11. Investor uses</li></ul>©FTSE International Limited 2011. ALL RIGHTS RESERVED. ANY INFORMATION REPRODUCED MAY ONLY BE DONE WITH FTSE’S PRIOR WRITTEN AGREEMENT.<br />
    • 12. Introduction to FTSE Group<br />Jointly owned by Financial Times and London Stock Exchange<br />Independent company with offices in 11 countries<br />Indices cover 80 countries and all major asset classes<br />Provides tools for investment to public pension funds, fund managers and stock exchanges through the calculation and management globally <br />Transparency, Partnerships and Policy Committees<br />©FTSE International Limited 2011. ALL RIGHTS RESERVED. ANY INFORMATION REPRODUCED MAY ONLY BE DONE WITH FTSE’S PRIOR WRITTEN AGREEMENT.<br />
    • 13. Introduction - FTSE Responsible Investment<br />©FTSE International Limited 2011. ALL RIGHTS RESERVED. ANY INFORMATION REPRODUCED MAY ONLY BE DONE WITH FTSE’S PRIOR WRITTEN AGREEMENT.<br />FTSE RI Products<br />
    • 14. FTSE4Good – The Last 10 Years<br />©FTSE International Limited 2011. ALL RIGHTS RESERVED. ANY INFORMATION REPRODUCED MAY ONLY BE DONE WITH FTSE’S PRIOR WRITTEN AGREEMENT.<br />FTSE4Good ESG Ratings Launch<br />FTSE4Good Global<br />Index Launch<br />New Climate Change Criteria<br />Strengthen Environmental Criteria<br />New Nuclear Power Criteria<br />New Uranium Mining Criteria<br />2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011<br />New Breast Milk Substitute Marketing Criteria<br />Strengthen<br />Human & Labour <br />R<br />Strengthen<br />Human and Labour Rights Criteria <br />Strengthen<br />Human & Labour <br />R<br />Strengthen<br />Human & Labour <br />R<br />New Countering Bribery Criteria<br />Strengthen<br />Human & Labour <br />R<br />Strengthen<br />Human & Labour <br />R<br />Future criteria: Corporate Governance, Health & Safety, HIV/AIDS...<br />New Supply Chain Labour Standards Criteria<br />
    • 15. FTSE4Good – The Selection Process<br />Engagement <br />ESG Evaluation by EIRIS<br />FTSE4Good Index Inclusion<br />FTSE4Good Universe<br /><ul><li>UK FTSE All World Developed
    • 16. FTSE All Share</li></ul>Approximately 2,400 eligible companies<br />Companies who meet FTSE4Good inclusion criteria are included in the index series<br />Each company assessed across 5 themes:<br /><ul><li>Environmental Management
    • 17. Climate Change
    • 18. Human & Labor Rights
    • 19. Supply Chain Labor Management
    • 20. Countering Bribery</li></ul>Companies who are currently included in the FTSE4Good Index, but no longer meet parts of the criteria enter an engagement process<br />©FTSE International Limited 2011. ALL RIGHTS RESERVED. ANY INFORMATION REPRODUCED MAY ONLY BE DONE WITH FTSE’S PRIOR WRITTEN AGREEMENT.<br />
    • 21. ©FTSE International Limited 2011. ALL RIGHTS RESERVED. ANY INFORMATION REPRODUCED MAY ONLY BE DONE WITH FTSE’S PRIOR WRITTEN AGREEMENT.<br />FTSE4Good – The Engagement Process<br /><ul><li>Companies normally enter a one year engagement process if:
    • 22. They are currently in the index but no longer meeting certain criteria
    • 23. FTSE introduces new criteria they must meet
    • 24. The company is part of a special collaborative engagement initiative.
    • 25. FTSE’s Responsible Investment team and EIRIS – the research provider – liaise with the companies through e-mails, phone calls, and face to face meetings to support them meeting the necessary criteria and improving their ESG practices
    • 26. FTSE’s RI team provides updates to investors and UNPRI signatories who are part of collaborative programs with the outcomes of the engagement process
    • 27. To date, FTSE’s RI team has engaged with over 1,000 companies, with a 60% success rate in retaining them in the FTSE4Good Index. </li></ul>Companies in Engagement<br />FTSE’s Responsible Investment Unit<br />EIRIS<br />UNPRI Signatories & other investors<br />
    • 28. ©FTSE International Limited 2011. ALL RIGHTS RESERVED. ANY INFORMATION REPRODUCED MAY ONLY BE DONE WITH FTSE’S PRIOR WRITTEN AGREEMENT.<br />The Growth of ESG Investment<br />As ESG Investment has almost quadrupled in the last 8 years,<br /> there is a growing need from investors for more ESG data<br />These figures represent assets under management that incorporate ESG and are sourced from the EuroSIF 2010, 2008, 2006 and 2003 SRI studies using USD conversion rates as of 22 Nov 2010. <br />
    • 29. ©FTSE International Limited 2011. ALL RIGHTS RESERVED. ANY INFORMATION REPRODUCED MAY ONLY BE DONE WITH FTSE’S PRIOR WRITTEN AGREEMENT.<br />FTSE4Good ESG Ratings <br /><ul><li>Bottom up analysis and a more granular approach compared to the FTSE4Good Index
    • 30. A comprehensive data set is generated that assigns a risk level and scores a company for each of six ESG themes
    • 31. Every company in the FTSE Developed Markets index is analysed</li></ul>6 theme scores<br />6 theme risks<br />3 sector relative pillar scores<br />3 pillar risks<br />3 pillar scores<br />1 sector relative overall score<br />1 overall risk<br />1 overall score<br />
    • 32. ©FTSE International Limited 2011. ALL RIGHTS RESERVED. ANY INFORMATION REPRODUCED MAY ONLY BE DONE WITH FTSE’S PRIOR WRITTEN AGREEMENT.<br />FTSE4Good ESG Ratings – Scoring<br />Theme & Pillar Level<br />Risk – All companies are assigned a risk for all 6 themes and all 3 pillars<br />Score – Based on the company’s risk, they are scored according to how many indicators they meet:<br />
    • 33. ©FTSE International Limited 2011. ALL RIGHTS RESERVED. ANY INFORMATION REPRODUCED MAY ONLY BE DONE WITH FTSE’S PRIOR WRITTEN AGREEMENT.<br />FTSE4Good ESG Ratings – Scoring<br />ICB Supersector Relative Scores<br />Within each of the 18 ICB Supersectors:<br /><ul><li>Ranks companies based on their absolute pillar and overall scores
    • 34. Assigns scores between 1 and 10 (pillar) and 1 and 100 (overall)
    • 35. This allows investors and users to quickly identify companies who score better than their peers in the same supersector</li></ul>1 to 10<br />1 to 10<br />1 to 100<br />1 to 10<br />
    • 36. More than 2,000 companies ratings for ESG<br />©FTSE International Limited 2011. ALL RIGHTS RESERVED. ANY INFORMATION REPRODUCED MAY ONLY BE DONE WITH FTSE’S PRIOR WRITTEN AGREEMENT.<br />
    • 37. ©FTSE International Limited 2011. ALL RIGHTS RESERVED. ANY INFORMATION REPRODUCED MAY ONLY BE DONE WITH FTSE’S PRIOR WRITTEN AGREEMENT.<br />How are investors using ESG data? <br />
    • 38. ©FTSE International Limited 2011. ALL RIGHTS RESERVED. ANY INFORMATION REPRODUCED MAY ONLY BE DONE WITH FTSE’S PRIOR WRITTEN AGREEMENT.<br />How can investors use FTSE4Good ESG Ratings data? <br />
    • 39. ©FTSE International Limited 2011. ALL RIGHTS RESERVED. ANY INFORMATION REPRODUCED MAY ONLY BE DONE WITH FTSE’S PRIOR WRITTEN AGREEMENT.<br />Conclusion<br />Responsible Investment & the FTSE4Good ESG Ratings<br /><ul><li>Expands on 10 years of ESG experience gained through the FTSE4Good Index Series
    • 40. Can assist signatories of the UNPRI in meeting their obligations
    • 41. Tool to support a consistent approach to governance and stewardship
    • 42. Evolutionary way to benchmark ESG risks and practices
    • 43. Large amount of information available allows for tailored data sets that can be used globally
    • 44. Useful across the investment lifecycle
    • 45. Methodology and process allows for future growth and expansion</li></li></ul><li>©FTSE International Limited 2011. ALL RIGHTS RESERVED. ANY INFORMATION REPRODUCED MAY ONLY BE DONE WITH FTSE’S PRIOR WRITTEN AGREEMENT.<br />Questions<br />web www.ftse.com/ftse4good<br />email FTSE4Good@ftse.com<br />
    • 46. ©FTSE International Limited 2011. ALL RIGHTS RESERVED. ANY INFORMATION REPRODUCED MAY ONLY BE DONE WITH FTSE’S PRIOR WRITTEN AGREEMENT.<br />

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