%0 Journal Article %A Benoît Mercereau %A João Paulo C.C. Sertã %A Constance Gavini %T Promoting Sustainability Using Passive Funds %D 2019 %R 10.3905/jii.2019.1.071 %J The Journal of Index Investing %P jii.2019.1.071 %X 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 %U https://jii.pm-research.com/content/iijindinv/early/2019/06/25/jii.2019.1.071.full.pdf