FTSE Group (“FTSE”), the global index provider, announced the launch of the FTSE Developed ex Fossil Fuels Index Series, an innovative set of benchmark indices that excludes companies linked to exploration, ownership or extraction of (carbon reserves) fossil fuels. This ground-breaking launch 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 utilizing seed capital from Natural Resources Defense Council (NRDC), a not-for profit organization 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% of global market capitalization.
A company that satisfies the following conditions is excluded from the Index Series:
- Classified as in the ICB subsectors – Exploration & Production, Integrated Oil & Gas, Coal Mining and General Mining; and either have
- Revenues arising from coal mining and crude petroleum and natural gas exploration and production; or
- Proved and probable (2P) reserves in coal, oil or gas based on the company’s published Annual Report and Accounts.
Mark Makepeace, CEO of FTSE Group said:
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:
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:
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 destabilizes 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.
James McRitchie, Publisher of Corporate Governance (CorpGov.net):
This is great. This will allow investors to participate in the broad market without lending support to the fossil fuel industry. Students in 350.org will now have an additional tool in their kit when negotiating divestment of college and university endowments. Trustees everywhere should take note. Good to see the FTSE Group, NRDC, and BlackRock taking the lead on this important issue.