Index firm FTSE absorbs quantitative ESG boutique

Index firm FTSE has taken on a quantitative environmental, social and governance (ESG) boutique founded by two former senior HSBC equities figures. Terms of the deal have not been disclosed.

FTSE, now fully part of the London Stock Exchange, has absorbed LCE Risk [low carbon economy], which was set up by Kevin Bourne and Gordon Morrison.

Bourne, the former Global Head of Electronic Trading at HSBC who headed up the bank’s Climate Change Index initiative, will run FTSE’s new ESG Service Unit as Managing Director, reporting to Mark Makepeace, FTSE CEO.

His former colleague Morrison, who was HSBC’s Global Head of Client Analytics, will head up a new ESG Analytics team at the index company.

“LCE Risk will be coming in-house to FTSE,” a spokesperson said, adding: “We have not disclosed the commercial arrangements.” The move will enable FTSE to develop services to “measure and model” the transition to a low carbon economy.

Both Morrison and David Harris, Director of Responsible Investment, will report to Bourne. Harris, who heads a team of six, is also vice chairman of the UK Sustainable Investment and Finance Association (UKSIF).

LCE Risk was set up to “monetize” the intellectualproperty of ‘Project Hidasta’, a privately funded research project looking at how the transition to a low carbon economy could affect 64,000 listed companies.
Among LCE’s directors was June Aitken, a founder of environmental and resources funds house, Osmosis Investment Management. Aitken, who is a former Head of Strategy Management at HSBC, is also to work with FTSE in a consulting role on behalf of Osmosis.

Osmosis recently partnered with Legal & General Investment Management on the Global Environmental Enterprises Fund. Osmosis said it had been hired by FTSE to review the pension fund and insurance market for environmental investments.

FTSE’s Makepeace said: “These appointments will allow us to more effectively support clients looking to integrate ESG into their investment decisions, and to manage the transition to a lower carbon economy.”

The development, he said, was a “direct response” to increasing demand from the global investment community for integrated ESG services. The new ESG Service Unit builds on the firm’s long-standing FTSE4Good, FTSE Environmental Markets and FTSE CDP Carbon Strategy indices.