DAVID HARRIS | Global Head of Sustainable Finance Strategy, London Stock Exchange Group
ARNE STAAL | Group Head of Indexes and Benchmarks, London Stock Exchange Group, and CEO, FTSE Russell
SANDRINE SOUBEYRAN | Director in Global Investment Research, FTSE Russell, London Stock Exchange Group

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 reallocation, 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.