FTSE Russell threatens to remove over 200 companies from FTSE4Good indices for climate reasons

According to the Financial Times, FTSE Russell has given over 200 companies 12 months to meet tighter climate performance standards or face being removed from the FTSE 4Good index series. The index series is tracked by a range of exchange traded funds and investors such as the Japanese Government Pension Investment Fund, the world’s largest pension fund. 

Companies in “primary impact subsectors” (e.g. fossil fuel, forestry, mining, transport and utilities) must show that the risk and opportunities of the transition to a low-carbon economy are integrated into their operational decision making. All other developed market companies need to show they are “building capacity” towards this. Companies in emerging economies must acknowledge climate change as a business issue. Companies are also rated on whether their carbon emission targets are compatible with the Paris Agreement. 

According to recent research from the SBTi, CDP and UN Global Compact, none of the largest stock indexes operating in G7 nations are aligned with the Paris Agreement. This includes the FTSE100 (UK), S&P 500 (US), FTSE MIB (Italy), CAC 40 (France), DAX 30 (Germany), NIKKEI 225 (Japan) and SPTSX 60 (Canada). These indices are thought to be on an average pathway of a 2.95 degrees Celsius temperature increase by the end of the century, with the FTSE100 and SPTSX 60 as the worst performers.