ESG Index launched by FTSE Russell Group
February 2019 will see an ESG index enter the UK market. This news vindicates the rising popularity of sustainable investments. People want more than just financial returns from their investments.
The FTSE index collects share prices for over 600 UK companies. Based on their market value, these companies are then ranked and traded on the London Stock Exchange. Instead of solely relying on a firm’s market value, the ESG Index goes one step further. It ranks companies based on ESG investment principles. From a company’s recycling policy and treatment of employees to the structure of its hierarchy.But. Why should you care how an already successful firm operates? The answer is, you reap what you sow. If we prioritise higher profits over sustainability, then money is all that we shall reap. Take the coffee bean trade for example. If retailers prioritise low prices, then product quality can fall.
Studies also show a more profound impact on the farming culture. Farm owners are forced to underpay their coffee bean pickers and processors. Fairtrade awareness has helped farm owners and workers receive their just rewards. Communities around coffee bean farms have begun to flourish. Although the coffee trade example is farfetched, we can learn from the principle. By collectively prioritising profit, we encourage firms to focus on their margins. Responsible investing encourages firms to invest in their employees and surroundings.