22 december 2019

FTSE leaves coal and oil firms and G4S on ethical investment list

FTSE4Good is ‘rewarding the most harmful activities in the corporate world’ – ShareAction

Jasper Jolly,, The Guardian, Sun 22 Dec 2019

Some of the world’s biggest fossil fuel companies, including Russia’s state oil giant Rosneft, have been added to the London Stock Exchange’s “ethical” investment lists.

The FTSE4Good indices, run by the London Stock Exchange Group’s FTSE Russell subsidiary, are marketed to investors interested in environmental, social and governance (ESG) issues.

However, the LSE has refused to remove big polluting companies or the security company G4S despite allegations of systematic labour abuses across the world.

At its latest semi-annual review earlier this month, FTSE Russell added the world’s 13th and 15th largest oil companies by market capitalisation, Rosneft and ConocoPhillips, to the FTSE4Good index. Rosneft Oil, Russia’s state oil company, produced 1.9bn barrels of oil in 2018. ConocoPhillips produced 468m in the same period. Other new inclusions were:

* Marathon Oil Corporation, a US company which produced 153m barrels in 2018.

* Lundin Petroleum, which produced 29.6m barrels in 2018.

* Origin Energy, which owns Australia’s largest coal-fired power station, Eraring.

The FTSE4Good index rules explicitly ban coal firms, but the company also added Itochu Corporation, a Japanese conglomerate which mines coal as well as having interests including food, technology, textiles and machinery. Itochu’s coal-mining subsidiaries made profits of 65.2bn Japanese yen (£455m) in 2018. However, a loophole in the rules means that this exclusion only applies to firms whose main business is coal production – letting through conglomerates.

The Guardian has previously reported that the FTSE4Good indices contain some of the world’s largest coal miners as well as oil and gas exploration and production companies.

At the same time as adding the fossil fuel companies, FTSE Russell’s ESG committee refused to remove G4S, despite serious allegations over its treatment of migrant workers in Qatar and the United Arab Emirates. The allegations were detailed in a report by Norway’s Council of Ethics, which monitors investments in the country’s £860bn Government Pension Fund Global. The report said there was an “unacceptable risk of the company contributing to systematic human rights violations”.

Human rights campaigners had expected the pension fund report – and G4S’s acknowledgement of issues – to trigger its ejection from the index.

Wolfgang Kuhn, director of investor engagement at ShareAction, said: “We’re incredibly disappointed at FTSE’s decision. It’s deeply troubling that the index provider doesn’t consider evidence of human rights abuses to warrant exclusion from a so-called ethical index, particularly its failure to apply its robust exclusion policy when it matters most.

“FTSE4Good is at best a mis-selling scandal in the making, and at worst continues to reward the most harmful activities in the corporate world.”

The latest publicly available factsheets show that 65 oil and gas companies were already present on FTSE4Good’s emerging and developed markets indices. They included British and French oil “supermajors” Royal Dutch Shell and Total – the sixth and 17th biggest contributers to carbon dioxide pollution in history.

Others included Italian supermajor Eni, Canadian oil sands miners Imperial Oil and Suncor Energy, and India’s Reliance Industries, the world’s seventh largest oil company. In a press release this month Italy’s Enel, the 13th largest, trumpeted its inclusion on the index because of its “sustainable business model”.

“Looking at the number of oil companies listed in this index, this looks more like FTSE4Crude than FTSE4Good,” said Rosie Rogers, head of Greenpeace UK’s climate campaign. “It takes some brass neck to argue that there’s anything ‘ethical’ about investing in the fossil fuel companies driving the climate emergency.”
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A spokeswoman for FTSE Russell declined to comment on the inclusion of new fossil fuel companies. On G4S, the spokeswoman said: “FTSE Russell and the FTSE Russell ESG advisory committee considered G4S against the controversy framework at this review, which assesses both the severity/scale of an incident as well as how effectively the company has responded.

“Based on this assessment it was decided not to suspend G4S at this review. FTSE Russell will continue to closely monitor developments in relation to G4S.”

The London Stock Exchange Group’s head of sustainable business, David Harris, has previously told the Guardian he would not exclude the entire oil and gas sector from FTSE4Good indices, saying divestment from those companies would mean forfeiting the ability to bring shareholder pressure to bear.

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