What is the FTSE4Good Index?

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FTSE4Good

In 1759, a Philadelphia meeting of Quakers prohibited members from taking part in the slave trade. Using the power of investment – or absence of it – they were able to affect an ethical change.

Around the same time, Methodism founder John Wesley put forth his tenets on “The Use of Money,” recognising capital as an influential ethical force: he discouraged participation in the tanning and chemical production industries. By the 1960s, many investors in and out of the Church were avoiding “sinful” companies dealing in guns, tobacco, alcohol etc.

The 1960s marked the beginning of an era of activism that many argue is yet to end, and the decades in between have seen more and more investors concerned about gender equality, civil rights, and labour unions. Dr Martin Luther King, Jr. famously recognised the power of ethical investment early on, and wrought social change through economic development projects such as the Montgomery Bus Boycott and Operation Breadbasket. King was able to target specific corporations as well as politicians with his boycotts, something investors could learn from.

South African apartheid introduced to the world the potential of international finance to make history. Worldwide opposition to the government’s treatment of native Africans saw institutions financial and political pull so much money out of the country that businesses were forced to draw up a charter demanding an end to apartheid.

Ethical banks, credit unions, and investment agencies sprung up in the 1980s as a natural evolution of these organic financial protests. They focus on using money in socially and environmentally responsible ways, such as in fair trade and carbon capturing.

These institutions are a vital source of cash for many communities. They direct money to housing projects, scholarships, and local causes. Using them means you can affect change in your areas of concern without actually losing any money.

These companies aren’t just puppets of “the man,” trying to create a false sense of righteousness: as the middleman between your money and its next destination they are able to guide cash into areas needing ethical development. They can choose not to give their vast stores of money to a company that pollutes water, or offer a lower interest rate for environmentally-friendly businesses. Your savings, with their help, could change the world.

Ethical investment, then, isn’t just about easing your conscience and alleviating guilt.

It can help to change the course of world history.

Where Does FTSE4Good Come In?

A stock index is a tool used by investors to describe and compare market values of specially selected stocks. An ethical investing stock index, therefore, would provide the market value of only socially and environmentally responsible stocks.

The FTSE Group is an award-winning British provider of stock market indices. It operates 250,000 indices, among which is the FTSE4Good Index: this is where a better future begins.

The FTSE4Good Index Series is a series of ethical investment indices covering markets all over the world, and using strict criteria based on Environmental, Social and Governance (ESG) practices. Using it makes it easy to track the performance of your favourite companies, research ones you’re interested in, and – of course – to check the investment you’re considering is financially wise.

There are several indices under the FTSE4Good series, so you can easily narrow you’re your search for a better tomorrow: the Environmental Leaders Europe 40 Index and the ESG Ratings Index are just a couple.

If you’re worried that using being ethical with your money will result in a lower return on investment, don’t – it’s proven that a company’s inclusion on the FTSE4Good Index doesn’t affect its performance in any significant way. In short, ethical companies do no worse than their scurrilous counterparts.

So the index is easy to use, but it can be made even easier: investment companies exist to use the index on your behalf, combining their financial wisdom with your desire to bring about a better tomorrow. Expert Ethical is just one such company, and one you can use online at that. It even has handy colour-codes so you can find the ethics you want to support with no hassle.

Why Choose FTSE4Good?

Where corporate self-regulation fails, ethical investments succeed: companies can’t be trusted to watch themselves. Companies that claim to keep an eye on themselves are often just “window-dressing,” or shielding their flaws under a disguise of false transparency. In particular, many critics claim these corporations took legitimate social movements and turned them into business models, undermining the whole point of being ethical.

Ethical investing and the FTSE4Good index, however, aren’t biased like these corporations. You can trust their choices to be sin-free. The only flaw is that sin and ethics are a matter of opinion! For a breakdown on the religion and politics of companies, you may have to look elsewhere.

The fact that “transparent” and “responsible” are now such buzzwords for business proves that the decades-long ethical banking mission is having deep and lasting effects on industries – and even governments – worldwide.

For other ethical investment indices, check out The Calvert Group, the Dow Jones Sustainability Index, and the Wilderhill Clean Energy Index.

To get started on building our future, ask us about how we can help you choose more ethical investments.

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