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FTSE Russell Launches Data Model to Measure the Global Green Economy

FTSE Russell launched a tool that measures the “green revenues” of over 16,000 firms comprising 98.5 percent of the global market value of listed companies.
By Roger Aitken
FTSE Russell

The global markets indexing provider FTSE Russell has rolled out an enhanced Green Revenues 2.0 Data Model, which measures the “green revenue exposure” of more than 16,000 listed companies across 48 developed and emerging markets. This coverage, similar in scope and structure to its Russell 2000 Index, represents 98.5 percent of the total global market value of listed companies.

Designed to support a growing appetite among institutional investors for sustainable investing strategies and a greater application of such tools in the area, this latest development comes as the green economy is estimated to worth approximately $4 trillion, equivalent to around 6 percent of the market capitalization of all global listed companies. 

This data model from FTSE Russell is touted as providing investors with a “comprehensive classification system” and covers sustainable products and services in 10 sectors, 64 sub-sectors and 133 micro-sectors.

Specifically, the sectors are as follows: energy generation; energy equipment; energy markets and efficiency; environmental resources; environmental support services; food and agriculture; transportation equipment; transport solutions; waste and pollution control; and water infrastructure and technology.

Originally, the first iteration of the index provider’s green revenues data model was launched back in 2015. It also serves as the underlying data to the London Stock Exchange’s “Green Economy Mark,” a certification that is awarded to London-listed companies that generate over 50 percent of their revenues from green activities.

To date, there are 86 companies listed on the exchange that have gained this mark, which spans the blue-chip FTSE 100 and the Alternative Investment Market (AIM).   

With the enhancement to the data model a green tiering system is also applied to determine the net environmental impact based on seven environmental objectives. This recognizes that green revenues come in lighter and darker “shades.”

By using three tiers to rank sources of green revenue by “limited,” “net positive” and “clear and significant,” FTSE Russell’s Green Revenues data is said to support a more lucid understanding of investors’ green exposure.

Further, the data model can be used for a growing number of regulatory reporting needs.

This includes climate performance against the requirements of the Task Force on Climate-related Financial Disclosures (TCFD). This framework, which was created in 2015 by the Financial Stability Board,  develops consistent climate-related financial risk disclosures for use by banks, companies and investors in providing information to stakeholders, as well as the European Union (EU) Taxonomy regulation.

With over a decade of green and sustainable revenues data now being available with FTSE Russell dating back to 2008, this standard is held up as enabling investors to monitor and track companies’ progress in achieving sustainable standards as the globe shifts to a more low-carbon economy.

Arne Staal, Global Head of Research and Product Management at FTSE Russell, commenting in the wake of the launch, said:  “FTSE Russell’s enhanced Green Revenues 2.0 Data Model is a powerful tool that investors can use to quantify a company’s contribution to the green economy in a single percentage of revenue figure.”

Staal, who was formerly a BlackRock product research head, added: “A high degree of overlap with the incoming EU Taxonomy will also allow asset managers to demonstrate the proportion of a fund that contributes to the growing and dynamic green economy. Furthermore, investors need access to high quality, comparable and relevant underlying data, available at scale, to support their sustainable investing strategies.”

In addition, Staal explained that the organization’s green revenues datasets are being used in a multitude of ways including in the FTSE TPI Climate Transition Index, which provides increased exposure to the opportunities arising from the global green economy across 10 various sectors.

Products within the FTSE Russell portfolio are used extensively by institutional and retail investors globally and currently around $16 trillion in assets are benchmarked to FTSE Russell indexes.

Image credit: PxHere

Roger Aitken headshot

A freelance financial journalist based in London and a former Financial Times staff writer covering stock exchanges, transaction services and trading technology, Roger Aitken has written for a number of B2B and B2C titles such as City A.M., Investors Chronicle, FTfm and Financial News as well as newspapers like The Guardian, The Independent and with Forbes as a contributor.

Read more stories by Roger Aitken