Twenty years ago, FTSE introduced a new kind of equity index amidst considerable public scepticism.
The FTSE4Good index series, launched in 2001, used transparent metrics of environmental, social and governance (ESG) performance to select its constituents, incentivizing companies to improve their sustainability practices.
Some regarded the approach of the new index as a fad. In a newspaper column, one of the UK’s main business commentators even called it the “silly index”. At the time, many investment professionals still considered ESG issues as irrelevant, and at worst as detrimental to returns.
Two decades later the capital markets and investment approaches have changed beyond recognition. Financial institutions around the world—including sovereign wealth funds, pension funds, insurance companies, asset managers and banks—now incorporate sustainability into their philosophy and processes as a matter of course.
