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Ethical standards will boost value

Adopting the standards set by the new ethical indices FTSE4Good will improve a company&#39s exposure to risk and preserve shareholder value, according to industry experts.

The claim comes as FTSE4Good meets on Friday to finalise the qualification and exclusion criteria for its socially respon- sible investment indices ahead of their expected launch this summer.

FTSE4Good intends to start with attainable tar-gets for acceptance to the indices but will evolve by tightening the criteria year on year.

Opinions across the industry are divided as to whether SRI is a benefit or hindrance to economic performance.

Marsh Risk Consulting managing consultant David Abrahams believes companies should integrate socially responsible considerations into their standard procedures if they want to manage brand risk properly, citing blue-chip companies which have seen share value fall after consumer campaigns.

Abrahams says: “A company&#39s reputation may be at risk if its leadership is unprepared to deal with a changing set of non-financial expectations of its investors and other stakeholders.”

Friends Ivory & Sime director of governance and SRI Craig Mackenzie says: “As an institutional investor, we are increasingly calling for companies to manage corporate social responsibility issues as part of their governance and risk management systems.”

But Michael Philips partner Michael Both says: “If you spend money being green you will lose market share to those who don&#39t. It is a very dangerous game to play.”

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