Innovations in Indexing: The Rise of ESG and Crypto
NEW YORK — The power of indexing is no longer confined to the S&P 500. In a recent appearance on CNBC’s ETF Edge, industry leaders Dan Draper (S&P Dow Jones Indices) and Tom Lydon (ETF Trends) discussed how the next wave of financial innovation is being driven by two massive themes: ESG and Crypto.
Climate as the ESG Growth Engine
Dan Draper noted that while ESG is one of S&P’s biggest growth opportunities, Climate has emerged as the most sophisticated segment. Driven by intense demand in Europe—and increasingly in the U.S.—S&P is leveraging its acquisition of Trucost to provide the transparent data that institutional investors require for carbon-heavy benchmarks.
IN THIS VIDEO, S&P Dow Jones Indices CEO Dan Draper and ETF Trends and ETF Database CEO Tom Lydon share how rising interest in sustainable and cryptocurrency investing is shaping markets. With CNBC’s Bob Pisani.
The Challenge of Standardization
A major point of contention remains the lack of a “universal language” for ESG. Tom Lydon highlighted that S&P’s methodology differs significantly from competitors like MSCI or FTSE Russell. This fragmentation makes it difficult for the SEC to set hard regulations, though Lydon suggests that the sheer volume of capital flowing into these benchmarks means the industry is moving ahead of the regulators.
Bridging the Gap to Crypto
The discussion also pivoted to the expansion of crypto indices. S&P has already launched benchmarks for Bitcoin and Ethereum, focusing on high-quality data partnerships to ensure these new indices are “investable” for institutional products like ETFs and derivatives.
Simultaneously, Tom Lydon discussed new partnerships, including work with Mike Novogratz, to develop indexes for crypto miners, enablers, and owners. This signals a shift toward a “Thematic” approach to crypto, much like the thematic evolution we’ve seen in ESG.
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