FTSE draws up green business classification

Formal classification for companies operating in environmental markets to help drive investment and underpin new indices.

The company behind the FTSE index is to launch a range of new indices and investment tools designed to help investors accelerate funding and improve returns from green businesses.

FTSE Group announced late last week that it has launched a new classification system designed to identify companies operating in emerging environmental markets by sectors and sub sectors.

The six sectors cover companies operating in renewable and alternative energy, energy efficiency, water infrastructure and technologies, pollution control, waste management and technologies, and environmental support services. Each sector is divided into two to five sub sectors, such as wind energy, building efficiency and water treatment equipment.

FTSE Group said the new classifications would make it easier for investors to compare companies operating in different regions and would also help underpin sophisticated investment products such as mutual funds and derivatives.

The new classifications will also provide the foundation for a raft of new indices, including an expanded series of Environmental Opportunities indices that will track companies operating in different environmental sectors and regional markets.

The company said it had also launched a new Environment Opportunities Index for the UK-based AIM stock exchange, which has become a popular home for many European clean tech start ups.

Xavier Rolet, chief executive of the London Stock Exchange Group, welcomed the new classification system and indices, arguing that they would "make it far easier for investors to identify new opportunities and benchmark existing investments, driving liquidity and investment".

"We are also delighted that AIM, the world's premier growth market, has its own environmental index, reflecting its success in helping environmentally focused companies raise capital from investors at an early stage of their development," he added.

The new indices are part of a growing trend in response to increased demand from investors for information on companies' environmental records and green products. For example, only last week Nasdaq announced that it too had launched a new index tracking the performance of firms with strong sustainability records.

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