Index provider FTSE Russell and Research Affiliates LLC have announced the launch of two new ESG (Environmental, Social and Governance) smart beta indexes: the FTSE4Good RAFI Indices and the FTSE RAFI ex Fossil Fuels Indices.
The firm writes that both indices can be used by a wide variety of market participants in creating responsible investment products. The FTSE4Good RAFI Indexes are designed to measure the performance of companies demonstrating strong Environmental, Social and Governance (ESG) practices. They utilize existing FTSE RAFI Indexes and overlay the transparent and clearly defined ESG criteria used in the FTSE4Good Index Series.
The FTSE RAFI ex Fossil Fuels Indexes are designed to represent the performance of constituents of selected FTSE RAFI Indexes after the exclusion of companies that have a certain revenue and/or reserve exposure to fossil fuels.
Katrina F. Sherrerd, President & Chief Operating Officer, Research Affiliates, says: “Over the years, many investors we’ve spoken with have expressed interest in a RAFI smart beta solution that reflects an environmental, social and/or governance (ESG) perspective. Through Research Affiliates’ continuing partnership with FTSE Russell, I am pleased to announce that we have developed a solution that meets these requirements, while also delivering on Research Affiliates’ mission to benefit investors. The new FTSE RAFI indices preserve the benefits of our leading smart beta franchise—a rules-based, transparent and low cost approach that offers the potential for outperformance—while consistently incorporating ESG investing principles.”
David Harris, ESG Director, FTSE Russell says: “These new FTSE RAFI indexes offer investors an innovative approach to passive investing by combining a fundamental factor approach with a focused set of sustainability parameters. FTSE Russell has long been a pioneer in the development of ESG benchmarking tools and we are delighted to extend our well established partnership with Research Affiliates by launching these exciting new index products.”