FTSE4Good: A Global Standard for Corporate Social Responsibility (CSR) and Socially Responsible Investment (SRI)

1. Peter de Graaf Head of Business Development FTSE 23 October 2001

2. Outline of presentation • Growing emphasis on CSR and SRI • What is FTSE4Good? • Constructing the FTSE4Good index • What is expected from companies? • Future development

3. Growth of Social Responsible Investing • Enthusiasts and believers in the 80s • The marketing department arrives in the 90s • Major players for the new millennium – SRI indexes arrive

4. What is FTSE4Good? • A series of benchmark and tradable indices, including only companies which meet defined standards for corporate social responsibility set by consultation with the market • An index series which reflects the concerns of socially responsible investors globally • A transparent and liquid index series usable as the basis for financial instruments and fund products

5. Region Universe Tradable indices Broad based benchmarks UK FTSE All-Share 50 stocks  Europe FTSE All-World Developed Europe 50 stocks  USA FTSE All-World USA 100 stocks  Global FTSE All-World Developed 100 stocks  The FTSE4Good Index Series

6. Aims of FTSE4Good • Encourage engagement and debate • Reflect mainstream concerns in SRI • Create an ‘aspirational framework for change’ • Establish a global standard for SRI • Create an effective and usable global SRI index • Raise $1m for UNICEF

7. FTSE and UNICEF • FTSE has worked with UNICEF for over 5 years • FTSE4Good fund and derivatives licence income will go to UNICEF • 50p per terminal displaying FTSE index values will go to UNICEF • Expect to donate US$1m to UNICEF in the first year

8. The role of EIRIS • FTSE4Good has been created in association with EIRIS (Ethical Investment Research Service) • EIRIS provide all the data on companies which is used to select constituents • EIRIS co-ordinate a network of international research partners • Extensive consultation was undertaken globally to encourage companies to disclose information

9. FTSE4Good Advisory Committee • Independent committee of international SRI fund managers and experts • Chaired by Mervyn Pedelty, CEO of Co-operative Bank • Role of the Committee: • developed the SRI criteria required to create the index • manages and implements the Ground Rules • may consider controversies • conducts regular scheduled reviews of constituents

10. Background to the index design • Limitations of data currently available: quantity and quality of disclosure • Reluctance of companies to disclose information • SRI growing fast, but still controversial and subjective • Extensive international market consultation Criteria and standards expected to evolve over time - launch of the index is intended to accelerate this

11. Possible exclusions International codes of practice Philosophical framework Best practice framework Selection criteria Common themes of social responsibility Index constituents Constructing the FTSE4Good Index

12. Exclusions • Exclusions align with common SRI thinking and were reached after analysis of the Consultation Exercise • Nuclear power stations, station owners & uranium miners • Tobacco • Manufacture of weapon & nuclear weapons components

13. Environment • Areas assessed are: • Policy • Management • Reporting • Currently only measuring high impact companies • Allows companies that demonstrate significant achievements in some areas, but fall short in others

14. Agriculture Mining and quarrying Airlines Materials tech Aluminium smelting Oil & gas exploration and production Airports Pottery, ceramics and glassware Basic building materials Pharmaceuticals Chemical manufacture Paper manufacture Civil engineering and construction Road distribution services Cleaning products Rubber Electricity Shipping Forestry and forest products Supermarkets Food producers Steel Glass Shipyards House builders Vehicle manufacture Heavy engineering Water Integrated oil and gas Waste disposal Materials engineering ‘High Impact’ Industries

15. Human rights • Areas assessed are: • Policy • Management systems • Reporting and consultation • Security arrangements • Currently only measure companies in high impact countries • Ongoing: Should companies be assessed on their internal performance, or their impact on the wider community?

16. Afghanistan Iraq Algeria Libya Angola North Korea Burma Pakistan Burundi Rwanda Chad Saudi Arabia China Somalia Congo (Republic of) Sudan Congo (Democratic Republic of) Syria Egypt Yemen Indonesia Yugoslavia Iran ‘High Impact’ Countries

17. Social and stakeholder relations • The least advanced area and most difficult to measure • Areas assessed are: • Policy • Management systems • Reporting • Consultation • All companies will be assessed • Currently assess companies on evidence of progress towards developing social policy, not absolute achievements

18. Performance

19. So what is the future • Engagement versus exclusions • Index criteria to be strengthened • SRI criteria to move into mainstream investment policies • Increasing pressure for companies to act responsibly • Public pressure • Regulatory developments • Financial impact

20. Contact Information Peter de Graaf peter.de.graaf@ftse.com +44 20 7448 1880 FTSE Client Services info@ftse.com +44 20 7448 1810 www.ftse.com FTSE4Good Website www. .com