Investors
April 01 2001
by Mike TuffreyOver the last two years, the Dow Jones Sustainability Group Indices have had a huge impact in grabbing boardroom attention. Senior executives may not grasp the full subtleties of CSR, still less sustainability, but they sure understand the rules of the market - the more people prepared to buy your shares, the higher the price will go. FTSE4Good has the potential to be more powerful still, provided the methodology is got right.
DJSGI seek out the best ten percent of companies, looking at a broad range of factors contributing to sustainability and ultimately making a judgement about whom to include. EIRIS has traditionally worked the other way round, seeking out 'wrong doing' and mechanistically excluding companies on grounds of animal testing, weapons manufacture, alcohol, gambling, environmental accidents and so forth.
Much depends on the advisory committee and the methodology it adopts. If FTSE4Good focuses on how companies are trying to behave, it will prove a powerful spur to improve CSR performance; if it simply separates out the sheep from the goats, based on what companies do, a real opportunity will have been lost.
Ultimately, the new indices are selling a service to investors who will actually decide which approach works best for them. Thankfully there's growing evidence that mainstream investment managers, not just the 'ethically screened' funds, are looking at CSR as a factor in long term commercial sustainability. Hopefully their interest in behavioural factors will prove decisive.