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Aug 09, 2019

The integration of ESG and passive – and the ‘third wave’: Ticker 106

‘I’ll bet hardly any investors know how their capital is being put to work’

Two bright threads are now firmly woven into the fabric of modern finance – passive, index-based investing. And, a focus on sustainability. Every day each thread grows more tightly bound to the other. For example, consider that of the 15 sustainable funds attracting the most investment in this year’s second quarter, eight were index funds

Chad Spitler was one of the first people to recognize this natural affinity. The former Blackrock managing director led the move to integrate ESG factors throughout Blackrock’s investment process. Ironically, while passive investment has encouraged more engagement between issuers and asset managers, the average investor is more distanced than ever from their portfolio. ‘I’ll bet hardly any investors know how their capital is being put to work,’ says Spitler. ‘It may be spread over hundreds of companies in a retirement account.’ 

But Spitler says that’s about to change. He says the next step in the field may be back to a sort of active management. A new kind of fund. For a new kind of investor. His new consultancy – called Third Economy – aims to further mainstream investors’ ability to both create profit and positive impact.