The majority of London’s blue chip firms will not be eligible for inclusion in a series of ethically correct stock market indices that are being developed by FTSE, the index compiler.
Speaking at the launch of the FTSE4Good index series, Mark Makepeace, chief executive of FTSE, predicted that more than half of the companies listed on the London Stock Exchange would fail to achieve the status of a socially responsible company when the list of eligible candidates is drawn up later
FTSE is developing the indices, which will allow investors to identify and track the progress of socially responsible companies, in response to demand from City institutions which are coming under increasing pressure to make
Last year legislation was introduced requiring pension fund trustees to disclose publicly the extent to which ethical considerations were taken into
account when making an investment decision.
Mr Makepeace said he hoped the introduction of the indices would encourage companies to clean up their acts.
"What we are trying to do is to encourage companies to act in this way. We think a lot of pressure will be brought on companies to do just that."
The indices will cover Britain, Europe, north America and the developed world as a whole. They are being developed in conjunction with Ethical Investment Research Service and a committee chaired by Mervyn Pedelty, boss
of the Co-operative Bank, which will responsible for the definition of a socially responsible company.
The UK and European indices will be introduced in June with the US and global versions appearing later this year. Mr Makepeace said he could not
reveal which firms would be disbarred but admitted that tobacco firms and arms exporters were likely to be excluded.