Paul : [00:00:00] Welcome to Index Ideas from FTSE Russell. I'm Paul Amery, your podcast host. In the podcast we explore index ideas that can help you address real- world investment themes and challenges. We look into how indices are built and why. As a reminder to listeners, you can't invest in an index, and the concepts that we discuss in this podcast are not investment advice. Any reference to potential investment strategies is therefore intended for informational and educational purposes only. In this episode of the podcast, I'm joined by Stephanie Meyer, who is Global Head of Sustainable at FTSE Russell. Stephanie, welcome to Index Ideas.
Stephanie: [00:00:36] Thank you for having me. Paul.
Paul : [00:00:38] Stephanie, FTSE Russell has recently conducted its eighth annual Sustainable Investment Asset Owner survey, and we published the results in early December. Listeners can sign up on the FTSE Russell website to read a copy of the report. Why do we conduct this survey and who takes part?
Stephanie: [00:00:54] So, FTSE Russell, we work across the investment ecosystem. A very important cohort is asset owners. So, as you said, we run this global annual asset owner survey to help us better understand priorities, strategies, adoption of sustainable investment and really how that can help shape our sort of product data, index development and really better understand one of the key client groups.
Paul : [00:01:22] In January this year, 2025, the US president, Donald Trump, signed an executive order directing the US to withdraw from the Paris climate agreement. Now, some people have said that this decision really heralded the end of sustainable investing. What do the survey results say about that?
Stephanie: [00:01:40] So our survey results indicate that sustainable investment is very much alive and well. And if anything, some of these challenges around the political backdrop have actually cemented and indeed increased the focus that asset owners have on issues such as climate. So, what we've seen is that for almost three quarters of asset owners, SI is firmly embedded in what they're looking at. Climate risk as one of the sort of specific issues has increased to 85%, considering that this is an important priority for them. So, we're certainly seeing a stabilisation and perhaps a recalibration of how asset owners are approaching sustainable investment. But the importance of the underlying issues is very much alive and well.
Paul : [00:02:36] Sustainable investment saw a boom for over a decade, with an acceleration of assets flowing into sustainable funds in 2020/2021 at the outset of Covid. But since the Russia-Ukraine conflict accelerated in 2022, for many governments, energy security seems to have eclipsed net zero as a policy goal. Do you think the demand for sustainable investment has peaked?
Stephanie: [00:03:01] So energy and the energy transition continue to be a really key theme for investors broadly and the asset owners that we surveyed. As a reminder, that was over 400 global asset owners. And what we're seeing there is, yes, there is a continued focus on that low energy transition. The influence of policy has changed, but the commitment to understanding how these big themes like climate change are influencing the investment landscape continues to be very strong.
Paul : [00:03:38] Based upon the survey results, which sustainability issues are asset owners most concerned about and which are they least concerned about?
Stephanie: [00:03:45] So it's probably no surprise to hear that climate change sort of tops the list of issues that asset owners are focussed on. And both from a risk perspective, but also increasingly understanding the physical risk issues as well associated with climate change. But we're also seeing continued interest in some of the social themes like diversity and inclusion and human rights.
Paul : [00:04:11] Has the emphasis there changed over time and if so, how?
Stephanie: [00:04:15] I think we're certainly seeing the continued rise in climate risks. I think in part that's a result of what we're seeing in terms of the physical risks coming to pass. I think also to a certain extent, the change in some of that policy commitment that you referenced earlier actually means how we're going to manage those systemic risks from an investment perspective become more of a concern. So we've certainly seen those risks or concerns for those risks increase in our latest survey results.
Paul : [00:04:51] And based upon the survey results, what do they say about how investors are incorporating climate and sustainability considerations into their asset allocation?
Stephanie: [00:05:01] What we're seeing is certainly for core public equities and fixed income, there's high levels of integration. Private markets, while a key area of interest, still has a lower integration or adoption rate. We're also in our conversations with clients, seeing a lot more interest in fixed income more broadly, whether that's corporate or sovereign, as being an area that investors are increasingly looking to meaningfully incorporate sustainability considerations into their investment strategies.
Paul : [00:05:37] You talked about the growing interest in incorporating in sustainable investment in private markets and in fixed income. What about absolute levels of implementation? Can you talk about what the survey results show there?
Stephanie: [00:05:50] Yeah. So I mean absolute levels are pretty stable over the last few years. I think what we're seeing is some of the most popular or sort of common methods are a combination of ESG integration, also thematic investment. We're also seeing a lot more focus on engagement and stewardship practices as well. So asset owners really recognising both the investment decision, but importantly how those investments are being managed as well. And I think that's particularly important as we're looking to a transition that is perhaps taking a more disruptive path where there are going to be much clearer sort of winners and losers as we navigate this next decade or so.
Paul : [00:06:38] What do the survey results say about motivation: what's motivating asset owners? Is it that fear of disruption? Is it reputational risk? Is it kind of real effects on budgets and policies? You know, can we interpret any of the results in that way?
Stephanie: [00:06:52] Yeah. So we're certainly seeing financial performance and also risk management as being top drivers for what we're seeing in terms of sustainable investment practices. I think certainly that focus on the financial impact and investment impact has risen since compared to previous years. I think also, asset owners are very firmly seeing this as part of the fiduciary duty and that being a key motivator. We're also seeing an increase, I think, where we're seeing some of the shift in terms of sort of downplaying some of the impacts is societal outcomes. Asset owners are being less explicit around those being the sort of key motivators for decisions around sustainable investment.
Paul : [00:07:39] In which ways are investors currently implementing sustainable strategies? Is it through exclusions or thematic investment engagement? Tilting of index weights. What trends are you seeing there?
Stephanie: [00:07:51] Yeah. So I think as mentioned earlier the integration piece definitely continues to be key, as is thematic investment. I think thematic investment is particularly interesting if you think about some of the key sustainability trends, that can drive growth as well as risk and how those are manifesting in the investment landscape. So, I mentioned engagement continues to be really key. And certainly a number of our clients are looking at how they use engagement alongside index-based strategies as well to ensure the transparency of the construction around an index. But importantly, the engagement that's being conducted with the underlying holdings as well.
Paul : [00:08:33] How are asset owners mixing active and passive approaches in sustainable investment?
Stephanie: [00:08:37] We're seeing a hybrid approach continuing. So index-based solutions have certainly been increasing considerably. Some of the things driving that is the transparency and the clarity around those approaches. What we're seeing, though, is a continued mix of approaches over time.
Paul : [00:08:58] And how does FTSE Russell help clients in these areas, whether they're active or passive managers?
Stephanie: [00:09:03] We work closely with clients to develop custom indices, but also to support in lots of vehicles to help investment across a different range of strategies. So climate, sustainable, thematic strategies as well. One of the key partnerships we have is with the Transition Pathway Initiative, which really helps. Part of our index construction our clients assess and understand those companies that are really positioned to navigate the low-carbon transition in a much more effective way.
Paul : [00:09:36] And geopolitics aside, what are the principal barriers to the further adoption of SI?
Stephanie: [00:09:42] So we're seeing that area has certainly mixed or changed perhaps over the last couple of years. I think certainly concerns around greenwashing risk, ESG, data availability, regulatory complexity, continue to be key areas that act as carriers.
Paul : [00:10:03] And as we're recording just before Christmas 2025, I have to ask you what you're looking out for in particular in the coming year?
Stephanie: [00:10:11] Well, we will be doing a 2026 trends report, so you can look out for that later in the year. But I think we're certainly seeing climate continues to be a key theme, the energy transition that we talked about earlier continues to be a key driver of investment that we're seeing. And with that, opportunities around different technologies, for example, around nuclear as well, and linked to climate, again, the adaptation sort of concerns and nature are part of that as well. We're also seeing a really interesting shift to Asia as being a really key region in terms of both sustainable finance, but also key in terms of the real impact of climate and how what we're going to see that play out over the next year and the years to come.
Paul : [00:11:02] Thank you, Stephanie. And that's it for this episode. If you've enjoyed the conversation, then please do follow us and give us a positive rating or review on your podcast app of choice. If you'd like to get in touch with Index Ideas, you can do that via the email
[email protected] but for now from me, Paul Amery, goodbye.
