The FTSE4Good Index has introduced a new range of criteria that focus on climate change. The new guidelines will require companies to take steps to offset global warming through business strategy and reporting.
The principles aim to bring climate change to the forefront of business thinking and to raise awareness in business circles. The focus of the guidelines will be on four areas:
Policy and governance: board level commitment to combating climate change and the development of a specific policy.
Management and strategy: short to medium term goals as well as long-term strategic goals.
Disclosure: companies will be expected to report on the steps taken.
Performance: companies will be expected to reach goals set by FTSE4Good.
The principles were launched in on the 5th anniversary of FTSE4Good, and are an indication that investors are increasingly starting to value companies’ approach to climate change. This view was supported by David Miliband, secretary of state for environment, food and rural affairs, who cautioned, at the launch, that companies that neglect environmental considerations could risk becoming unprofitable.
The guidelines will be implemented in January 2008 and will be applied to 255 companies identified as having the highest impact on climate change. These companies will be helped by FTSE4Good’s responsible investment unit to understand the criteria, what they need to do to comply, and the time limits. These firms will have two years to comply with the new standard. Companies that enter the Index for the first time next year will be expected to comply with the criteria immediately.
Companies that attempt to stop the public policy process on climate change will be removed from the Index at its discretion. There is also the possibility that the Index will “name and shame” companies that do not respond to inquiries regarding their actions in meeting FTSE4Good criteria.
The FTSE4Good Index Series has been designed to measure the performance of companies across a number of global corporate responsibility standards.
COMMENTS