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Enabling systematic engagement through index investing

Author

Listed:
  • Harris, David

    (London Stock Exchange Group)

  • Staal, Arne

    (London Stock Exchange Group)

  • Soubeyran, Sandrine

    (London Stock Exchange Group)

Abstract

Passive investing and sustainability engagement were historically deemed to be at best challenging, at worst incompatible. There is a growing realization that combining index investing and sustainability engagement is not only possible but can reinforce and mobilize significant global assets under management to enable collaborative engagement. By linking engagement to transparent capital re-allocation, passive investing has the ability to influence and achieve changes in corporate practices and strategies, leading to real world impact. This paper explores the evolution of ESG engagement and passive investing and demonstrates that sustainability index design can lead to scalable, efficient, and impactful corporate engagement across entire markets. The use of such indexes to steer investment flows provides clear incentives for companies to improve sustainability performance and deliver outcomes sought by asset owners and society at large.

Suggested Citation

  • Harris, David & Staal, Arne & Soubeyran, Sandrine, 2022. "Enabling systematic engagement through index investing," Journal of Financial Transformation, Capco Institute, vol. 56, pages 119-126.
    • Handle: RePEc:ris:jofitr:1686
    as

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    More about this item

    Keywords

    ESG; index investing; sustainability engagement; sustainability; indexes;
    All these keywords.

    JEL classification:

    • F64 - International Economics - - Economic Impacts of Globalization - - - Environment
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth

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