The London Stock Exchange's FTSE4Good index range marks 25 years this month, but the anniversary comes with a sobering performance gap for UK investors committed to environmental, social and governance (ESG) principles. Over the past decade, the FTSE4Good UK index has delivered a total return of 57%, trailing the FTSE 100's 70% gain and the All-Share index's 67.5% rise, according to data from the index provider.
The divergence is even starker over five years: FTSE4Good has risen 35% against the FTSE 100's 46.5% and the All-Share's 38%. The underperformance reflects the UK market's heavy weighting in sectors excluded from ESG screens — notably oil and gas, defence, tobacco and mining — which have staged strong rallies. Shell shares rose more than 30% in the first quarter of 2026, while BP gained 40% in the same period. BAE Systems' share price has trebled since Russia's invasion of Ukraine in 2022, and Rolls-Royce has multiplied tenfold over the same period.
Tobacco stocks have also defied the ESG ban. British American Tobacco shares have appreciated nearly 70% since October 2024, when they yielded 9%, as the company pivots towards smokeless products. Imperial Brands shares are up nearly 60% since spring 2024, despite a 20% decline since early February this year. Mining companies, many excluded from ESG indices for their coal and metals operations, have also surged: Rio Tinto is up 75% over the past year, BHP 80%, and Anglo American 84%.
The global version of FTSE4Good has performed better, helped by a 44% weighting in technology stocks compared with 35% in the broader FTSE All-World index. However, the UK series lacks that tech exposure, leaving domestic ESG funds more exposed to the sectors they are designed to avoid. The original FTSE4Good criteria excluded tobacco and weapons, then expanded to defence, fossil fuels and gambling. More recently, airlines, alcohol and mining have been added to the restricted list.
For UK households, the performance gap has direct implications. Many pension funds and ISAs with ESG mandates have missed out on the rally in defence and energy stocks. At the same time, some excluded sectors — such as gambling — have struggled: Entain, owner of Ladbrokes and Coral, has lost 75% since late 2021. The mixed picture underscores the complexity of ESG screening. The Bank of England has previously warned that climate-related financial risks can affect portfolio returns, but the data suggests that exclusionary screening carries its own opportunity cost.