September 23, 2004
As Socially Responsible Investment Grows in Japan, FTSE4Good Launches New Index
by William Baue
Following on the introduction of the first SRI index by Morningstar Japan last year, FTSE4Good
unveils the second SRI index covering the Japanese market exclusively.
In late August 2003, the global socially responsible investment (SRI) index provider FTSE4Good had no "plans for
specifically covering the Japan market in the pipeline," according to Sandra Steel, head of
external relations for the FTSE Group.
Indicative of the substantial growth of SRI in Japan recently, such plans traveled the entire
length of the pipeline over the past 12 months, from conception through development to the birth of
the FTSE4Good Japan
Index Index earlier this week.
"There has been great effort from Japanese
business to meet the FTSE4Good criteria, which has led to the creation of a new domestic Japan
index within the series," said Mark Makepeace, CEO of the FTSE Group.
in SRI has grown dramatically in the past year," adds Lynne Sims, FTSE's senior vice president for
marketing and communications. "Of the 75 companies admitted to the FTSE4Good indexes in March this
year, 37 were Japanese."
"Although the first SRI-related fund was launched in Japan only
five years ago, there are now 11 SRI fund options with a total of almost US$1 billion in assets
under management," Ms. Sims told SocialFunds.com.
The number of Japanese companies from
the broader universe of the FTSE Global Equity Index that meet the FTSE4Good Inclusion Criteria almost doubled
over the last year, from 88 to the 166 that now constitute the FTSE4Good Japan Index. These
criteria cover exclusionary screens on companies involved in tobacco and nuclear power and weapons
production, as well as positive screens for environmental sustainability, human rights, and strong
stakeholder relations. The Good
Bankers, a Tokyo-based SRI research firm, handles the screening of Japanese companies in the
large- and mid-cap segments for FTSE4Good.
The top ten constituents of the index by
market capitalization include several with significant increases in share price over the past year.
These companies are Toyota (ticker: TM; +34.2 percent), Sumitomo Mitsui
Financial Group (SMFJY; +62.4 percent), Millea
+24.8 percent), and Honda (HMC; +14.5 percent). The top ten
also includes one company, NTT (NTT), whose share price fell 32.3
percent over the past year. The share prices of the remaining five companies on this list all
decreased by less than 8 percent.
This launching represents the second SRI index covering
the Japanese market exclusively, as the Morningstar Japan Socially Responsible Investment
Index launched just over a year ago. While Morningstar's reputation does not rest on its SRI
expertise, FTSE4Good vies with the Dow Jones Sustainability Indexes (DJSI) as the primary global
providers of SRI indexing services.
The FTSE4Good Index Series covers the Global,
European, UK, and US markets with benchmark and tradable indexes for each. FTSE expects investment
products based on the index to be forthcoming.
"For example, in June of this year, Japan's
largest asset management firm, Nomura
Asset Management, launched a FTSE4Good Tracker fund, based on the FTSE4Good Global 100 Index,"
said Ms. Sims. "Demand is now building for a robust Japanese index that would allow for the
development of index-linked financial socially responsible investment products that focus on the
Continuing FTSE's longstanding relationship with the global children's
charity UNICEF dating back to 1997, the
FTSE4Good Japan Index will contribute licensing revenues to the Japan Committee for UNICEF.
"With the introduction of FTSE4Good Japan, FTSE is advancing the debate on socially responsible
investment within the Japanese business community and encouraging good corporate practice," said
Ken Hayami, Secretary General for the Japan Committee for UNICEF. "We all know that the community
already plays a positive role in dealing with global environment and human rights related
"To make the world fit for children, who are the future of our world, we still
need to address scores of other issues like basic education, nutrition, health, and the protection
of children from exploitation and violence," he added.
FTSE4Good Inclusion Criteria
address issues such as child care support and provisions against child labor. FTSE4Good recently
lifted its exclusion of companies that market infant formula and replaced it with measurable