FTSE Russell ESG Scores: Understanding Organizational Indicators for Sustainability

FTSE Russell ESG Scores is an internationally recognized assessment system for Environmental, Social, and Governance (ESG) factors. Developed by FTSE Russell, a subsidiary of the London Stock Exchange, the system uses a comprehensive framework that covers three main dimensions, 14 themes, and over 300 indicators. It is designed to help investors and companies understand and enhance sustainability performance, while supporting effective and transparent investment decision-making.

What is FTSE Russell? Definition and Key Roles

FTSE Russell is a leading global provider of stock market indices and assessments in environmental, social, and governance (ESG) areas. It is a subsidiary of the London Stock Exchange Group. The company plays a pivotal role in creating, maintaining, and licensing major stock market indices such as the FTSE 100 in the United Kingdom and the Russell 2000 in the United States.

In the realm of ESG assessments, FTSE Russell has extensive experience, having evaluated more than 8,000 companies across 47 countries worldwide. The company employs globally recognized evaluation standards and is guided by an independent committee composed of representatives from multiple sectors. This approach ensures that the assessments reflect best practices aligned with international standards and the principles of the International Organization of Securities Commissions (IOSCO).

FTSE Russell is widely respected by both institutional and retail investors around the world. The company’s indices underpin assets worth approximately USD 15.9 trillion under management. It plays a key role in providing innovative investment solutions, enabling investors to conduct more effective analysis and make informed investment decisions.

Furthermore, FTSE Russell has taken a prominent role in promoting sustainable investing. In 2020, the company responded to a U.S. executive order by removing eight Chinese companies from its indices. In 2022, it also removed all Russian securities from its indices in response to the invasion of Ukraine and the ensuing sanctions. These actions demonstrate FTSE Russell’s commitment to responsibility and its ability to respond swiftly to global developments.

ESG Assessment by FTSE Russell

The FTSE Russell ESG Scores are a system for evaluating the environmental, social, and governance (ESG) performance of publicly listed companies. This assessment is structured into three tiers, consisting of:

1. 3 Main Pillars: Environment, Social, and Governance
2. 14 Themes: For example, climate change, labor standards, and anti-corruption
3. More than 300 Indicators: Covering policies, strategies, processes, targets, and performance tracking

The assessment is based on publicly disclosed company data, such as annual reports, sustainability reports, and official websites. On average, each company is evaluated across approximately 125 indicators, depending on the material issues relevant to each industry sector and country.

FTSE Russell ESG Scores are rated on a scale from 0.0 to 5.0, with the following definitions:

• 0.0: No information available for assessment
• 5.0: Best practices within the industry

This rating system enables investors to understand a company's ESG performance across multiple dimensions, supporting investment decision-making, risk management, and the development of ESG-integrated investment strategies.

The FTSE Russell ESG Scores are assessed annually. The results are published through the Stock Exchange of Thailand and FTSE Russell channels. Companies included in the evaluation can access their detailed assessment reports via the FTSE Russell system free of charge.

FTSE Russell ESG Compared to Other Standards

FTSE Russell ESG Scores are among the internationally recognized ESG assessment systems, but they differ in several key aspects from other frameworks, as outlined below:

1. Comparison with SET ESG Ratings

• Scope: FTSE Russell assesses over 8,000 companies across 47 countries, whereas SET ESG Ratings focus exclusively on listed companies in Thailand.
• Assessment Method: FTSE Russell relies on publicly available information, while SET ESG Ratings are based on company-submitted questionnaires.
• Scoring System: FTSE Russell uses a 0–5 scale, while SET ESG Ratings classify scores into four levels: BBB, A, AA, and AAA.

2. Comparison with MSCI ESG Ratings

• MSCI uses a rating scale ranging from AAA to CCC, unlike FTSE Russell’s 0–5 scale.
• MSCI places more emphasis on ESG risk analysis, while FTSE Russell focuses on overall ESG performance.

3. Comparison with S&P Global ESG Scores

• S&P Global uses a 100-point scoring system, compared to FTSE Russell’s 0–5 scale.
• S&P Global provides more detailed assessments in certain industries, while FTSE Russell covers a broader range of companies.

4. Comparison with Sustainalytics

• Sustainalytics emphasizes ESG risk assessment and assigns risk scores, whereas FTSE Russell evaluates overall ESG performance.
• Sustainalytics ranks companies within industries, while FTSE Russell focuses on scoring based on predefined criteria rather than rankings.

Cautions for Investors

• ESG assessments may vary across agencies due to differing methodologies and evaluation criteria.
• It is advisable to consider data from multiple sources before making investment decisions.
• ESG assessments are just one part of investment analysis and should be considered alongside other factors.

FTSE Russell ESG Scores stand out for their broad company coverage worldwide and their reliance on publicly disclosed data, which enhances transparency in the evaluation process. Nevertheless, investors should always incorporate data from multiple sources and consider the specific context of each company when making investment decisions.

Sources and References

For those seeking in-depth information on FTSE Russell ESG Scores, the following are key resources:

Documents and FAQs

• FTSE Russell has published The Guideline to FTSE Russell ESG Scores in Thai, which details the structure of the evaluation, scoring methodology, and how the results are applied.
• A comprehensive FAQ document is also available, addressing questions about FTSE Russell ESG Scores and Indices.
• The Stock Exchange of Thailand has published a document titled FTSE Russell ESG Score Indicators, which outlines all the indicators used in the evaluation process.

Key Factors for High Scores

• Transparent and comprehensive data disclosure: FTSE Russell relies on publicly disclosed information for its assessments.
• Clear and measurable targets: Particularly in areas such as greenhouse gas reduction and achieving carbon neutrality.
• Robust policies and practices across all three ESG dimensions: Environment, Social, and Governance
• External verification of quantitative data: Enhancing the credibility of the information.
• Innovation and development of environmentally friendly products.
• Active community engagement and long-term social development.

Additional information is available on the websites of FTSE Russell and the Stock Exchange of Thailand. Companies that are evaluated can also access their detailed assessment reports through FTSE Russell’s system free of charge. These reports help companies better understand their ESG strengths and areas for improvement.


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