The latest FTSE rollout will underpin a BlackRock strategy initially, but opens the door for other investment vehicles ahead.
FTSE today is rolling out a family of four broad developed-market equity benchmarks, each excluding companies around the world that extract and produce fossil fuels. It's a tangible gesture in the global warming debate that the indexing company says will lead to at least one investable product.
One of these indexes will initially be used to benchmark a BlackRock investment fund strategy that will be seeded—and actually deployed—by the Natural Resources Defense Council, a New York-based nonprofit organization whose mission is “To Safeguard the Earth.” Fossil fuels are one of the main sources of rising “greenhouse gases” in the atmosphere that many scientists say are behind rising temperatures and changing climate on the planet.
This three-way partnership between BlackRock, FTSE and the NRDC stems from the NRDC’s desire to allocate the “bulk” of its endowment, estimated to be more than $100 million, to so-called “green” strategies, promoting investing that caters to climate-conscious investors. These investors, according to NRDC and FTSE, include a wide range of foundations, universities and various pension funds.
At this time, it’s unclear what structure the BlackRock strategy will have, but it’s not expected to be an indexed mutual fund or an exchange-traded fund. BlackRock wasn’t immediately available to comment. To be clear, the indexes are designed to give investors access to the vast majority of companies in the developed world—minus dozens of firms that are in the fossil-fuel-production business.
“There are a lot of investors who want to divest, not just NRDC,” Kevin Bourne, managing director at FTSE and head of the FTSE ESG product group, told ETF.com. “There’s a group of 17 endowments who have already publicly declared they are going to divest, and there are many others that are going to do the same.
“Some of these are modest endowments, but they are divesting on a values basis,” he said, noting that FTSE is seeing a lot of demand for these types of values-based investment tools coming from the institutional space as well as from “younger” investors who view green investing and divesting as extremely important.
“NRDC will be first investor, but we believe there will be quite a few others investors interested in this thematic product,” Bourne added.
The indexes are as follows:
- FTSE Developed ex Fossil Fuels
- FTSE North America ex Fossil Fuels
- FTSE Developed ex North America ex Fossil Fuels
- FTSE Developed ex Korea ex Fossil Fuels