FTSE4Good: Socially responsible investment has not paid off

The FTSE4Good index, which is celebrating its first anniversary this week, is showing greater losses than a regular index.

The FTSE4Good indices are designed to reflect the performance of socially responsible shares in the continental European, US, Global and UK markets. They were set up by the FTSE, in association with The Ethical Investment Research Service (EIRIS).

The FTSE4Good UK was initially criticised, by companies that were not included, for being too exclusive. During its first year, the FTSE4Good UK has been revised twice, each time including new groups of companies.

The FTSE4Good UK index and the FTSE4Good UK 50 were set up a year ago, to ensure an easy way to track the performance of socially responsible companies. The selection criteria for a company to be included are:

* Environmental sustainability: regular environmental reports, environmental management system in place, commitment to use of targets, commitment to monitoring and audit, etc;
* Social issues and stakeholder relations: the company must have an equal opportunities policy, health and safety systems, training and employee development systems, and it must publish regular social impact reports, etc;
* Human rights: the company must have a policy statement specifically on human rights, which goes beyond employee rights, a commitment to at least two of the International Labour Organisation’s Core Labour Standards for employees globally, signed up to human rights initiatives such as the UN Global Compact, SA 8000, Ethical Trading Initiative, etc.

Companies dealing with weapons, nuclear power or tobacco, are automatically excluded from any FTSE4Good index.
The FTSE4Good UK got the worst possible start, since the markets have been extremely bad ever since 11 September 2001. However, an evaluation shows that the FTSE4Good UK 50 has fallen even more that the standard FTSE 100 index, minus 30% compared to minus 28%. In fact, tobacco, arms and mining stocks have had the best performances on the stock markets in the past year.

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