FTSE Russell Unveils UK ESG Risk-Adjusted Index

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by KnowESG
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FTSE Russell introduced the FTSE UK ESG Risk-Adjusted Index Series to expand its multi-asset ESG and climate indices range.

The UK ESG Risk-Adjusted Index Series incorporates exclusions and reduces carbon emissions and reserves exposure, favouring companies with better ESG attributes.

The exclusions encompass controversial weapons, thermal coal production, energy generation from thermal coal, Arctic oil & gas exploration, oil sands and shale energy extraction, tobacco production and retail, and controversial conduct.

Arne Staal, CEO of FTSE Russell, expressed that the launch of the FTSE UK ESG Risk-Adjusted Index Series responds to clients' demand for incorporating ESG and Climate goals into UK equity portfolios.

While fossil fuels are not entirely excluded, the index reduces fossil fuel reserves exposure by 50%, resulting in significant underweights in Energy and Basic Materials Industries. Utilities and Industrials are also underweighted due to the 50% reduction in carbon emissions exposure.

UK companies exhibit relatively high ESG scores, prompting the ESG target of the UK ESG Risk-Adjusted indices to be set 5% higher than the aggregate benchmark ESG levels. This ensures a consistently high ESG standard is maintained.

The new UK index series enhances ESG characteristics while balancing tracking error and other risk and return factors. Its launch marks the incorporation of crucial ESG considerations into the flagship UK Series.

Aled Jones, Head of Sustainable Investment Solutions at FTSE Russell, stated that this launch aims to meet client needs by providing an ESG-adjusted version of the UK equity benchmark series while maintaining transparency, governance, and extensive data and research.

FTSE Russell's sustainable investment indices are currently tracked by over US$296 billion of passive assets. The introduction of the FTSE UK ESG Risk-Adjusted Index Series allows investors to maintain exposure to UK large-caps while improving the overall ESG profile of their portfolios.

To view and compare company ESG Ratings and Sustainability Reports across sectors, follow our Company ESG Profiles page.

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Source: FTSE Russell


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