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Passive ESG Investing “Needs Better Benchmarks” 

Index providers should step up the development of net zero-aligned benchmarks and asset owners need to apply them, said the Net Zero Asset Owner Alliance (NZAOA). Given asset owners use passive investment strategies for a large portion of their assets there is a notable lack of benchmarks, according to a new report report, despite some recent encouraging steps. The report says: “To date, the focus of index providers has been on equity climate benchmarks, while indices in other relevant assets classes—such as fixed income—have been lagging”. The UN-convened group of 80 institutional investors, with US$11 trillion in AUM, proposes ten principles for the development of “climate indices that can be applied in a broad range of cases and to globally diversified multi-asset class portfolios”. These include transparency in methodology and design, no automatic exclusions except thermal coal and ensuring the indices relate to de-carbonisation in the real economy.  

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