FTSE Russell is a subsidiary of London Stock Exchange Group that produces, maintains, licenses, and markets stock market indices.
FTSE Russell ESG Ratings provides a comprehensive assessment of a company's Environmental, Social, and Governance (ESG) performance, condensing qualitative and quantitative ESG information into a single rating.
The rating methodology includes an assessment of an issuer's total exposure and performance across multiple dimensions within the three pillars of Environmental, Social, and Governance. The assessment covers 14 themes, each consisting of around 300 indicators.
Rating methodology and criteria
As part of its environmental pillar, FTSE Russell ESG Ratings assesses various factors, including carbon emissions, energy consumption, waste management, and resource efficiency. Efforts to reduce the company's environmental impact are also taken into account. This includes, for example, implementing renewable energy initiatives, setting emission reduction targets, and improving water and soil management practices.
The social pillar assesses a company's performance in labour practices, human rights, supply chain management, community relations, and product responsibility. Several factors are taken into account, including diversity and inclusion, safety practices, employee engagement, customer satisfaction, and compliance with labour laws.
The governance pillar addresses the company's governance structure, board effectiveness, risk management, and transparency. In addition to examining board independence, executive compensation, ethics, shareholder rights, and anti-corruption measures, FTSE Russell also considers the company's cybersecurity and data privacy policies.
ESG scores and indices
Using the results of this assessment, FTSE Russell gives a score to each company, providing investors with a clear understanding of the company's ESG performance.
Additionally, FTSE Russell offers a range of ESG indices that enable investors to integrate ESG considerations into their investment strategies. For example, the FTSE4Good Index Series and FTSE Blossom Japan Index provide sector-specific ESG benchmarks.