Enabling systematic engagement through index investing

David Harris, Arne Staal and Sandrine Soubeyran ()
Additional contact information
David Harris: London Stock Exchange Group
Arne Staal: London Stock Exchange Group
Sandrine Soubeyran: London Stock Exchange Group

Journal of Financial Transformation, 2022, vol. 56, 119-126

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.

Keywords: ESG; index investing; sustainability engagement; sustainability; indexes (search for similar items in EconPapers)
JEL-codes: F64 G11 G23 Q56 (search for similar items in EconPapers)
Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:ris:jofitr:1686

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