FTSE Launches Terror-Free' Index: Washington D.C., Risk Group Weighs in on Legislation, Marketing Opportunities
March 31, 2008
NEW YORK-FTSE has partnered with Conflict Securities Advisory Group, a risk measurement firm based in Washington, D.C., that has been focusing on Iran, North Korea, Sudan and Syria since just before the terrorist attacks in 2001, through the new FTSE CSAG Terror-Free Index Series.
The London-based index manufacturer, which has $2.5 billion benchmarked against its indices, and CSAG jointly launched the breakthrough index series here last Wednesday at the Women's National Republican Club. The two companies portray the new indexes as the next-iteration of socially responsible, or green, investing, FTSE Americas will initially focus on marketing the global index, which whittles the index of companies that have absolutely no ties to any business in the four regions down to a mere 1,900 firms, to institutional investors-primarily to pension funds.
While FTSE and CSAG are tackling institutional investors at the outset because of their sophisticated grasp of such complex and highly charged investing topics as terror-free investing, demand among ordinary retail investors for the index, nonetheless, is likely to rise, speakers said.
Legislation supporting terror-free businesses and government entities is swiftly gaining steam, attested speakers, Sen. Craig M. Johnson (D-N.Y.) of the 7th District, among them.
Within the next week, FTSE will also announce a retail exchange-traded fund, according to industry sources, and one of FTSE's largest custodians, Northern Trust, is likely to be the sponsor.
Terror-free investing is the next generation of socially responsible investing, said the Hon. Roger W. Robinson, Jr., CSAG president and former Senior Director of International Economic Affairs at the National Security Council during the Reagan Administration.
"Federal legislation is coming because it's a matter of Americans' perception [about] international security concerns and investment policy," Robinson said.
Sen. Johnson added: "It's incredible when you talk to a retired police officer or firefighter and tell them it's likely their pension fund is likely doing business with a country that has ties to a country that has said it would like to wipe Israel off the map or that has made no bones about their intent to destroy our country.
"Investors want that accountability from their legislators. They want them to take a stand," Sen. Johnson added
Leading the discussion on whether an index that scrutinizes companies and industries that are so profitable in energy-rich nations compromises returns, was Jerry Moskowitz, president of FTSE Americas. Running a three-year "back-cast," as Moskowitz termed it, there is little difference between the FTSE-CSAG Terror-Free Index and its FTSE All-World Index benchmark. In fact, the terror-free index was down, but by "less than one-tenth of 1%," or 10 basis points, the FTSE Americas president said.
Furthermore, risk, and socioeconomic terror risk being a critical issue, Moskowitz continued, is down slightly in the screened index. "People don't have to look at this from the point of view of lower returns or higher risk," he said.
The SEC's Fab Four
The Securities and Exchange Commission, through Chairman Christopher Cox's risk-based approach following the various Wall Street scandals of the beginning years of this century, has also created an office dedicated to following the flow of money to Iran, Sudan, Syria and North Korea, searching for signs of non-humanitarian use. Although the office only has four people in it right now, this is a significant development, according to FTSE Americas. In fact, rather than submitting filings for pension or other funds with the main office at the SEC, the firm is currently considering going through the SEC Office of Global Security Risk.
So far, state comptrollers are warming up to Conflict Security Advisory Group's database, Robinson said. "New York City is one of our first clients," he noted. "Comptroller Bill Thompson took an active look. New York City is obviously a very key player in the inception of terror-free investing in the U.S. It's a validating event."
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