PT  - JOURNAL ARTICLE
AU  - Benoît Mercereau
AU  - João Paulo C.C. Sertã
AU  - Constance Gavini
TI  - Promoting Sustainability Using Passive Funds
AID  - 10.3905/jii.2019.1.071
DP  - 2019 Jun 25
TA  - The Journal of Index Investing
PG  - jii.2019.1.071
4099  - https://pm-research.com/content/early/2019/06/25/jii.2019.1.071.short
4100  - https://pm-research.com/content/early/2019/06/25/jii.2019.1.071.full
AB  - Sustainable index funds are becoming mainstream. A natural question is how well these funds promote sustainability. They can do so in two ways: by influencing firms’ cost of capital; and by voting and engaging management. Both work empirically. Moreover, promoting ESG creates financial value for shareholders. How well sustainable index funds use these two promotion levers varies a lot, though. For example, 37% of sustainable index funds have a lower ESG score than their non-ESG benchmark. Only 16% perform more than a simple negative screening and go beyond specific themes while improving ESG scores by at least 5% and avoiding derivatives. The number and sophistication of sustainable index funds should continue to grow. Frameworks for analyzing them are therefore timely.TOPICS: ESG investing, mutual funds/passive investing/indexing, performance measurement