About this Episode

Reid Steadman, Head of ESG Indices at S&P Dow Jones Indices, joins The Essential Podcast to discuss the role of ESG in the midst of the global pandemic and a major economic slowdown. He explains how the experience of the lockdown may prepare us for further action on ESG and what the ESG market can do to expand its reach and appeal.

The Essential Podcast from S&P Global is dedicated to sharing essential intelligence with those working in and affected by financial markets. Host Nathan Hunt focuses on those issues of immediate importance to global financial markets – macroeconomic trends, the credit cycle, climate risk, energy transition, and global trade – in interviews with subject matter experts from around the world.

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Show Notes

Read the research discussed in this episode:

• After markets closed on April 30, 2020, the S&P 500® ESG Index underwent its second annual rebalance since it launched in January 2019. Last year, the rebalance resulted in some changes that hit the headlines—most notably, the removal of Facebook from the sustainable version of the iconic S&P 500. With markets currently in turmoil due to the outbreak of COVID-19, interest in ESG is at an all-time high. Thus, the big question, “Who made the cut?” is perhaps more relevant now than ever before. Read why S&P Dow Jones Indices dropped Walmart and Twitter from the S&P 500 ESG Index, among other major changes, this year.

• Late last summer, nearly 200 chief executives (S&P Global’s own CEO, Doug Peterson, included) put their signatures on a new statement of the purpose of a corporation, one focused not only on shareholder value, but on value for all key stakeholders. The declaration emphasizes people—employees, customers, and communities—in which employers know they must invest to ensure long-term growth and success. This renewed focus on a company’s contributions to society as a whole is in line with the increased popularity in sustainable investing; one-quarter of all professionally managed assets now incorporate environmental, social, and governance (ESG) considerations.

• On April 20, 2020, the S&P Eurozone LargeMidCap Paris-Aligned Climate Index (S&P Eurozone PA Climate Index) was launched. This index has been designed to align with recommendations from the Task Force on Climate-related Financial Disclosures and follow the new minimum standards for EU Paris-Aligned Benchmarks proposed by the EU, while remaining as close as possible to its benchmark index, the S&P Eurozone LargeMidCap. Read more about the index here.

• In recent years, socially responsible investing has gained importance worldwide. There has been a paradigm shift in investment strategy globally, whereby the number of market participants who have become socially conscious and want to hold investments in companies that acknowledge the relevance of environmental, social, and governance (ESG) factors in doing business has significantly increased. ESG investments have matured globally, and many fund managers are tracking ESG indices like the S&P 500® ESG Index and S&P Europe 350® ESG Index, among others. Passive fund managers use exchange-traded funds or structured products that track an ESG index to make investments for market participants, while active fund managers depend on ESG scores to make active investment bets. Learn about India's S&P BSE 100 ESG Index, designed to measure exposure to securities that meet sustainability investing criteria while maintaining a risk/reward profile similar to that of the S&P BSE 100, its benchmark index.

• With knowledgeable industry contributors, S&P Dow Jones Indices' Indexology Blog delivers more than fundamentals on how indices are conceived, constructed, and used in the marketplace. Indexology features posts, reports, performance, and discussions from thought leaders across S&P DJI as well as guest posts from renowned, subject matter professionals. As a forum for expressing various views and thoughts on indexing, Indexology provides insightful research and a look at market, political, and economic events through the lens of S&P DJI's index data.

The Essential Podcast is edited and produced by Molly Mintz.