PracticeConsultingBig names left off ‘ethical’ FTSE list

Big names left off 'ethical' FTSE list

More than a third of FTSE-100 companies, including Tesco, Royal Bank of Scotland and a host of mining giants have not made the grade required for the new FTSE4Good indices, launched yesterday.

The new lists will be used as benchmarks for socially responsible investment funds to measure their performance and to encourage firms to adopt and improve environmental, human rights and social performance through best practice’.

Close Fund Management has already launching the first ‘socially responsible’ fund and other investment house are expected to follow suit.

Companies were judged on their environmental efforts, social responsibility and civil rights records, with 36 of the UK’s biggest companies falling short on one or more of these measures, while almost two-thirds of all listed UK companies also missed out.

The top 50 index was topped by BP, a decision which is already proving controversial. Human rights organisation, the Free Tibet Campaign, said regardless of the oil giant’s stated commitment to human rights, its decision to operate in China made its selection ‘inappropriate’. In addition BP has been harshly criticised for the enormous profits it reported in its last annual report.

Adding to the controversy, tobacco companies, weapons manufacturers and nuclear power operators were all automatically excluded, but drugs and alcohol companies made a strong showing with GlaxoSmithKline, AstraZeneca and Shire all included as are beverage makers Allied Domecq, South African Breweries and Diageo.

Financial services were well represented with the some exceptions. HSBC, Lloyds, Barclays, Halifax, Abbey National, Bank of Scotland and Standard Chartered all made it in to the FTSE4Good UK 50 together with life assurers CGNU, Prudential, Legal & General and Royal Sun Alliance.

But Tesco, Royal Bank of Scotland, Safeway, Anglo-American, Rio Tinto and Billiton were all excluded.

FTSE chief executive Mark Makepeace, speaking on CNBC television last night said that for companies to make the list they needed to have a clear policy in all three areas, as well as being ‘proactive’ on those issues.

Makepeace said many companies had been left out of the lists because of insufficient public information, not necessarily because they violated ethical practices.

In the case of Tesco, the supermarket retailer was left out because it did not have an environmental report and target.

The Confederation of Business Industry said while it welcomed the initiative, it was ‘seriously concerned’ about how this index would be perceived by the media, the general public and companies themselves.

Deputy director-general, John Cridland said: ‘There’s a danger that firms included might be seen as ‘good’ and those left off as ‘bad’.

FTSE chief financial officer Paul Grimes said the indices reflected the growing debate and the growing focus around the globe on matters that go beyond just financial performance these days.

‘This is already happening in the market, and we’re responding to market demand,’ he said.

Links

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The FTSE4Good UK 50 Index

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