Global index provider FTSE Russell has launched the FTSE4Good ASEAN 5 Index, adding to its existing FTSE4Good family of environmental, social and corporate governance (ESG) themed indices. The new index tracks the performance of companies listed on the five ASEAN (Association of South East Asian Nations) exchanges: Singapore, Indonesia, Malaysia, Philippines and Thailand. The companies included in the index have been assessed to ensure they meet the standards required for FTSE4Good inclusion.
Having launched in 2001, the FTSE4Good Index series currently offers ESG-themed references for US, European, Asian and global companies.
The FTSE4Good Index Series is designed to help investors integrate ESG factors into their investment decisions. The indices identify companies that better manage ESG risks and can be used as a basis for tracker funds, exchange-traded funds, structured products and performance benchmarks.
Using FTSE Russell’s ESG ratings methodology, companies are assessed on over 300 indicators, both qualitative and quantitative, covering 14 themes which include – among others – health & safety, labour standards, human rights, water use, biodiversity, climate change, tax transparency, and anti-corruption. These thematic ratings are added to produce three scores for each firm based on each ESG pillar. Collectively the three pillars produce a total ESG score for the firm between 0-5. Companies with a score of 3.2 or higher are selected for inclusion in the index. Furthermore, companies engaged in certain activities (such as weapons or tobacco manufacturing), or those embroiled in current controversies, will be automatically excluded.
The FTSE4Good Index series was originally launched in 2001 and has subsequently expanded the offering to include US, European, and global indices reflecting the significant increase in the number of institutional investors seeking to integrate ESG considerations into their portfolios.
Donald Keith, Deputy CEO, FTSE Russell, said in a statement: “As index partner to the ASEAN Exchanges we are delighted to add the FTSE4Good ASEAN 5 Index to both the FTSE ASEAN and FTSE4Good Index families. ASEAN markets are attracting significant investor interest and the new product provides an important tool for portfolio construction and benchmarking. Institutional investors around the world are increasing their focus on integrating environmental social and governance data into investment approaches.”
Speaking on behalf of ASEAN Exchanges, Datuk Seri Tajuddin Atan, Chief Executive Officer of Bursa Malaysia, added: “ASEAN Exchanges have been working diligently to create ASEAN centric products and promote ASEAN as an asset class. The introduction of an ASEAN ESG Index is a key development in the effort to showcase quality companies that are benchmarking their environmental, social and corporate governance practices against some of the world’s best. The FTSE4Good ASEAN 5 is the start of a new ASEAN asset class based not only on performance, but also on a quality of the companies.”
As of 31 March 2016, the index has significant country exposure to Malaysia (34.9%), Thailand (31.7%), Indonesia (13.8%), Singapore (12.3%) and the Philippines (7.4%). The major industry exposures are to financials (45.8%), industrials (16.1%), utilities (11.0%) and oil & gas (8.7%). The index is relatively concentrated with the top 10 holdings accounting for 52.4% of the index’s total market capitalisation while the weight of the largest constituent, Public Bank BHD, is 8.9%.