FTSE Russell Unveils New US ESG Indices

    Stockholm (NordSIP) – Investor demand for ESG products has led to an 88% increase in ESG/SRI funds since 2018, thank to sustained inflows into passive ESG funds, and the mainstreaming of ESG into passive investing. To continue to tap into the popular financial trend, FTSE Russell launched 6 new US ESG Indices.

    The Russell US ESG Indexes were designed to integrate ESG into institutional-grade US equity indexes.  The indices are based on FTSE Russell’s widely used US equity benchmarks, the Russell 1000, Russell 2000 and Russell 3000 indices. The new series contains two sub-groups, depending on whether investors want to apply negative screens or whether they also want to target a specific ESG score improvement.

    The Russell ESG Screened Target Exposure Indexes are for investors who want to remove harmful products or controversial activities and still maintain broad US market exposure. The ESG profile of the underlying index is improved by eliminating exposure to companies involved in the following business operations: Controversial Weapons, Firearms, Tobacco and Fossil Fuels. In addition, companies with the highest ESG controversies are excluded.

    The Russell ESG Enhanced Target Exposure Indexes are designed for investors seeking ESG score enhancement alongside the risk and return characteristics of the underlying benchmark. These indexes not only remove exposure to the same set of controversial business operations as the screened versions, but also incorporate sustainability issues by targeting specific ESG score improvement versus the benchmark. The ESG Enhanced indexes use Refinitiv ESG scores, an innovative framework that measures a company’s ESG performance, commitment and effectiveness relative to its industry peers.

    “When it comes to sustainable investment, choosing an appropriate index truly matters,” Tony Campos, Head of Sustainable Investment, Americas, FTSE Russell, said. “The Russell US ESG Indexes was developed for investors looking to incorporate sustainability considerations within a broad market portfolio without impacting the risk and return characteristics of the headline benchmark. Moreover, the two sub-groups were constructed with different client use cases in mind, giving investors options based on their preferences for ESG.”

    According to FTSE Russel, The six new indexes are constructed using robust ESG screening criteria and the target exposure methodology ensures they closely match risk and return characteristics of the underlying benchmarks.

    Image by Sven Lachmann from Pixabay

    Filipe Albuquerque
    Filipe Albuquerque
    Filipe is an economist with 8 years of experience in macroeconomic and financial analysis for the Economist Intelligence Unit, the UN World Institute for Development Economic Research, the Stockholm School of Economics and the School of Oriental and African Studies. Filipe holds a MSc in European Political Economy from the LSE and a MSc in Economics from the University of London, where he currently is a PhD candidate.

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