Index Impact: Passive investors are actively tilting stock indexes toward sustainability

  • Major institutional investors are moving to change the indexes. The world’s largest pension fund, the Government Pension Investment Fund of Japan, has moved $40 billion in its equities portfolio from a traditional passive index based on market capitalization to one weighted for environmental, social and governance themes and, in particular, de-carbonization. 
  • If it takes hold, the change could trigger a massive shift in assets and, over time, reward companies that make faster transitions to the low-carbon economy and punish those that move slower.