FTSE Russell launches a new set of sustainable investment fixed income indices (SIFI) – the FTSE Fixed Income Global Choice and Fixed Income Excluding Fossil Fuels Enhanced index series.
The methodology is based on their equity counterparts, the FTSE Global Choice series and the FTSE Ex Fossil Fuels series, bringing consistency across equity and fixed income.
Scott Harman, global head of fixed income at FTSE Russell explained that the new index launches address the growing trend of integrating sustainable investment themes into fixed income indices.
The FTSE Fixed Income Global Choice series has been designed to represent the performance of securities in FTSE Fixed Income indices that exclude issuers based on their conduct or product involvement in specific sectors.
The series helps investors align their portfolios with their individual values by selecting issuers based on the impact of their conduct and products on society and the environment.
The FTSE Fixed Income ex Fossil Fuels Enhanced series represents the performance of securities in FTSE Fixed Income indices after the exclusion of issuers that have certain exposure to fossil fuels.
The two new benchmarks complements the FTSE Impact Bond series which enables global debt investors to participate in the rapidly growing green, social, and sustainable (GSS) bond market.
Impact bonds have greater transparency in their use of proceeds and project impacts, providing a vehicle for investors who are looking for investments which yield direct climate, environmental or social benefits.
“Our new FTSE Russell SIFI indexes address a growing need for sustainable investment solutions in the fixed income market,” said Harman. “As investors look to align their portfolios with their ESG values, we have developed a thorough methodology to enable investors to exclude issuers based on their conduct or product involvement in specific sectors.”
He added, “We believe sustainable investing in the fixed income market will accelerate in the coming years, becoming mainstream and making it more challenging to hold portfolios without at least a basic sustainability element.”
Separately, FTSE Russell also published a new paper – Sustainable Investment: Not Just an Equity Game, which explores the role of sustainable investment in the global securities market’s largest asset class, fixed income.
The report notes growing investor demand for this type of solution and assesses the challenges in implementing a sustainable approach in fixed income.
It also looks at the potential impact of sustainability on a portfolio’s risk/return profile and describes FTSE Russell’s approach to implementing sustainability in fixed-income indices.