Why does a sustainable asset manager like Triodos Investment Management choose to develop its own equity index? 

Waals: "In the institutional investment landscape, there is an increasing demand for investments that yield a positive impact. Pension funds and insurance companies are progressively striving to invest a portion of their assets not only with a focus on risk and return but also on the positive contributions their investments make in terms of social, environmental, and governance criteria. However, until now, there has been no representative benchmark for equities that adequately translates this need into a concrete investment universe. Many sustainable portfolios were still benchmarked against broad, traditional indices, such as the MSCI World All Cap Index, resulting in unfair comparisons. This is why, in collaboration with STOXX, we developed the iSTOXX Triodos Developed Markets Impact Index specifically composed of companies that have a measurable positive impact and also meet our own stringent minimum standards."

How exactly is this index structured? 

De Vries: "The index includes companies that derive at least a quarter of their turnover from activities contributing to one of our five transition themes: Food, Resource, Energy, Societal, and Wellbeing. These themes are linked to the UN Sustainable Development Goals, such as SDG 7 for affordable and clean energy, SDG 8 for decent economic growth and SDG 13 for climate action. The indices are compiled using hard data sourced from International Shareholder Services ESG (ISS ESG), fully integrated with the infrastructure of STOXX, which is part of Deutsche Börse. This ensures the entire process is highly transparent and reproducible."

What sets this index apart from other sustainable benchmarks? 

Waals: "Many sustainable indices are based on exclusions. They may exclude fossil fuels, for example, but do not actively promote positive impact. We do. Only companies that actively contribute to a more sustainable world are included in our index. This truly sets a new standard for impact investing in liquid markets."

How did the collaboration with STOXX come about? 

De Vries: "We have been using ISS ESG data for our impact reports for several years. When we began seeking a partner to build the index, it became apparent that STOXX worked closely with ISS ESG through Deutsche Börse. This made the collaboration particularly effective. Within two weeks, they accomplished what other parties had failed to achieve in months. The synergy of their technical expertise with our vision proved to be highly effective in practice."

What are the main benefits of this index for institutional investors? 

Waals: "For pension funds and insurance companies, this index serves as a benchmark that constitutes the long-term strategic framework within which their asset management can be structured. In response to the growing demand for making positive impact with equity investments, our impact index offers a clear and transparent universe of companies with a demonstrable positive impact. These companies also meet our own minimum standards for preventing negative effects. Investors thus do not have to continually justify why they do not invest in certain companies, such as Tesla or arms manufacturers that are included in the broader index they previously used. Instead, it fosters more substantive discussions on sustainability. Indeed, they can utilise this universe as a strategic framework to build or benchmark their own portfolios. Furthermore, the index is fully compliant with the highest standards, such as UCITS, which facilitates implementation."

Is this index also intended as a basis for new investment products? 

De Vries: "The index was primarily developed as a strategic framework and benchmark, rather than for launching products based on it. However, if institutional parties express interest in basing products on it, we are certainly open to exploring that possibility. The crucial aspect is that we can initiate the conversation and clarify what true impact investing entails. The fact that the index provides a solid starting point for that dialogue is paramount for us."

How do you ensure the index remains up to date? 

De Vries: "The index is reweighted quarterly using the most recent data. Only companies that continue to meet our impact criteria retain their place within the index. For instance, if a company falls below the threshold of 25% revenue from positive impact, it no longer qualifies and will thus be removed from the index. Currently, the index comprises around 900 stocks. We anticipate that the universe will only expand as companies enhance their reporting and sustainability practices."

What does success look like for you with this index? 

Waals: "We hope that this impact equity index will evolve into an accepted standard within the institutional market, facilitating scalable, positive impact even through liquid equity investments. If we can not only drive the conversation but also contribute to making pension funds more sustainable, then we will have achieved our mission."

Are there plans to utilise this index within Triodos' own funds? 

De Vries: "Not at present. The index is a valuable addition to our tools and certainly provides us with new insights, but our funds are constructed bottom-up, based on thorough research. We will, however, monitor internally how our funds compare to the index. Whether we will explicitly use the index for fund management in the future remains to be seen. For us, this is not a marketing tool, but a logical extension of who we are and what we have been doing for over 30 years: using money as a force for positive change."