FTSE4Good, the equity index provider, has outlined climate change
measures that it will soon expect companies to adopt if they are to be
included in the FTSE4Good index.
Draft FTSE4Good criteria on
climate change issued last month state that companies should have a
clear greenhouse gas reduction strategy and a ‘long-term public goal of
significant reductions over a specified time period’.
Constituent
companies will also have to show year-on-year improvements in emissions
reductions or be carrying out ‘transformational initiatives’
such
as buying low-carbon electricity, generating renewable energy, cutting
carbon dioxide emissions in the supply chain or switching to
energy-efficient products and services. In addition, they must refrain
from adopting a ‘negative position’ on the scientific consensus on
global warming.
The criteria, which are now out to
consultation, will initially apply only to companies in sectors judged
by FTSE4Good to have ‘high’ or ‘medium’ impacts on climate change.
High-impact sectors will include oil and gas, mining, chemicals,
industrial metals, construction, travel and electricity. The criteria
will be slightly less demanding for automobile, aerospace and defence,
food production and pharmaceuticals companies, which are judged to be
medium-impact.
Climate change issues have always been considered
when FTSE4Good decides whether to include a company in its index, but
there have been no specific criteria as in other areas such as bribery
and corruption or breast milk substitute marketing.
Once the
new criteria are finalized next spring, companies that fail to meet
them will be automatically excluded from the index. A detailed
timetable for their introduction will be announced on publication.
The
draft was drawn up partly as a result of discussions in focus groups
with various companies, including Honda, Peugeot Citroen, Umicore and
Veolia, and consultancies such as Sancroft and URS. FTSE4Good’s new
criteria are being introduced at a time of growing pressure on business
to manage its impact on the world’s climate.
