Published on 3 September 2026, “Growing corporate engagement and ESG progress in Japan”, a paper from FTSE Russell, LSEG’s index business, produced with SGX, offers a revealing snapshot of sustainable indexing. Japanese companies submitted a record total of more than 20,000 comments on their preliminary ESG assessments during the latest June review, signalling stronger engagement with FTSE Russell’s assessment process. The process includes review cycles in June and December. The paper’s chart puts the notional value of outstanding SGX FTSE Blossom Japan futures contracts at around US$145 million in June 2026, up roughly 40–45% from about US$100 million in December 2025, despite the FTSE JPX Blossom Japan and Sector Relative indices underperforming FTSE Japan All Cap in Q2 2026 by 46 and 347 basis points, respectively. [1]
The paper shows how sustainable indexing has developed into a combination of corporate engagement, portfolio construction and practical investment tools. Engagement, investment performance and demand for implementation can move in different directions. An ESG benchmark can become more useful to institutions without outperforming in every period. The broader question for 2026 is therefore where sustainability is securing a durable place in portfolios, and which providers can turn that use into recurring business.
The evidence points to selective growth: passive sustainable funds and customised indices are gaining ground, while parts of the ESG fund market remain under pressure. Recent announcements from STOXX, MSCI, Morningstar Sustainalytics and Euronext show competitors responding through portfolio construction, climate analytics and local distribution. The Japanese case provides a practical starting point for assessing those strategies.
What Blossom reveals about adoption
The FTSE Blossom Japan Index launched in 2017 and was adopted by Japan’s Government Pension Investment Fund (GPIF). A Sector Relative version followed in 2022, also supporting a GPIF passive allocation. Their construction seeks stronger ESG characteristics while controlling departures from industry or sector exposures. In January 2025, FTSE Russell extended the approach through the Blossom World and World Sector Relative equity series. [2]
The financial commitment is substantial. GPIF’s latest annual report records ¥750.9 billion against the FTSE JPX Blossom Japan Index and ¥1,578.7 billion against its Sector Relative counterpart at 31 March 2026, approximately ¥2.33 trillion combined. GPIF’s wider allocation review also incorporated ESG investments into regular rebalancing. Across all its ESG indices, their shares of domestic and foreign equities declined to approximately 10.6% and 6.5%. The Blossom allocations nevertheless represent a substantial funded commitment within this broader reassessment of ESG portfolio weights. [3]
The surrounding infrastructure matters. FTSE Russell’s May 2025 agreement with Japan Exchange Group specified TOPIX constituent information for the December 2025 rebalance and introduced the FTSE JPX names. [4] Blossom also extends into Japanese and global corporate bond benchmarks, using issuers from the corresponding equity universes and their subsidiaries. [5] Together with the SGX futures market, these connections make an ESG selection framework usable across investment and trading processes.
For LSEG, Blossom brings together an established institutional allocation, alignment with a familiar Japanese market benchmark and exchange‑traded implementation. The combination gives FTSE Russell a concrete base from which to serve further sustainability mandates, supported by funded portfolios and practical trading instruments.
From ethical screens to portfolio objectives
Sustainable indexing began well before the recent ESG boom. The index now known as the MSCI KLD 400 Social Index launched in May 1990. The Dow Jones Sustainability family followed in 1999 and FTSE4Good in 2001. These benchmarks converted views about corporate behaviour into rules for selecting securities and measuring performance. The launch of the UN Principles for Responsible Investment in 2006 helped place such considerations within mainstream institutional investment processes. [6], [7], [8], [9]
Climate objectives subsequently added another layer. EU legislation in 2019 created Climate Transition Benchmarks and Paris‑aligned Benchmarks, with minimum methodology standards following in 2020. The benchmark could now embody a specified decarbonisation path as well as an assessment of corporate ESG quality. [10] During the subsequent product boom, Morningstar recorded $142.5 billion of sustainable fund inflows and 266 launches in Q4 2021. Its universe was already changing, however, including the removal of more than 1,000 European funds after tighter classification criteria. [11]
The 2022 reversal exposed the consequences of construction choices. FTSE Russell’s contemporary review described pressure on growth‑oriented green equities and longer‑duration green bonds as rates rose, alongside strong fossil‑fuel stocks. Some broader ESG indices nevertheless outperformed. Exclusions, sector weights, valuations and duration could produce sharply different outcomes. [12] The experience made a general ESG label less informative than the portfolio decisions beneath it.
Adoption shifts towards passive and bespoke indices
Adoption is growing selectively. Morningstar recorded $84 billion of sustainable fund outflows in 2025, following $38 billion of inflows in 2024. Some UK institutions moved pooled ESG holdings into bespoke accounts outside its database, preserving mandates despite recorded outflows; their share of the annual total is unquantified. [13]
Q2 2026 brought $3.7 billion of global net inflows, excluding China and with Australia and New Zealand reported through May. Passive funds attracted money in Europe and the United States while active strategies lost it. [14]
| Q2 2026 net flows in USD billions | Passive sustainable funds | Active sustainable funds |
|---|---|---|
| Europe | +11.4 | −7.8 |
| United States | +6.5 | −3.6 |
Source: Morningstar. Flows exclude funds of funds. Published figures are rounded. [14]
US inflows were concentrated: First Trust Nasdaq Clean Edge Smart Grid Infrastructure ETF attracted $3.1 billion, exceeding the category’s roughly $3 billion net gain. Global sustainable fund assets rose from $3.50 trillion to $3.73 trillion, mainly through market appreciation. [14]
FTSE Russell’s September 2026 survey shows stronger demand for customisation: 35% of respondents used custom sustainable indices in passive allocations, up from 21%. Sustainability adoption rose from 73% to 84%. The sample comprised 402 asset owners in 24 countries, all implementing or considering sustainable investment. [15]
Europe nevertheless recorded 13 sustainable fund launches and 64 closures in Q2. [16] The evidence points to growth in passive and bespoke implementation within a consolidating market. These measures provide no comprehensive global total for assets tracking ESG indices.
Competitors target specific portfolio needs
On 1 October 2026, STOXX and Osmosis launched 48 iSTOXX Osmosis Multi Factor Transition indices, integrating carbon, water and waste efficiency into value, quality, momentum and low‑volatility strategies. [17]
Bloomberg’s September 2025 Screened Choice launch offered six configurable exclusion modules and 66 initial equity indices. [18] The July 2025 J.P. Morgan Mansart iCubed fund paired Impact Cubed’s design with Solactive’s administration; Solactive’s February 2026 corporate Paris‑aligned methodology also documents its fixed income offering. [19], [20]
Climate data is another priority. MSCI acquired First Street on 3 August 2026; Morningstar Sustainalytics announced development with XDI and Veridion on 24 June, linking physical assets and climate hazards to financial risk. [21], [22] Yet MSCI’s Q2 Sustainability and Climate revenue grew 3.4% to $91.9 million while net sales fell 34.9% and retention slipped from 93.8% to 92.3%. These figures cover data and analytics, not index licensing. [23]
Local partnerships expand distribution. Euronext’s Athens ESG and Athens ESG Tilted indices, announced on 14 September 2026, use Sustainalytics data. SIX’s SPI ESG 25, launched on 1 April, combines size and liquidity with Inrate ESG Impact Ratings. [24], [25]
Regulatory adaptation also matters. ICE secured ESMA recognition on 8 June 2026, preserving EU access for 100 Climate Transition and Paris‑aligned Benchmarks. [26] S&P DJI’s 2025 renaming to Dow Jones Best‑in‑Class and S&P 500 Scored & Screened aligned its range with fund‑name guidelines; the latter’s 2026 review confirms continued operation. [27], [28]
The shared direction is clearer portfolio objectives, stronger data and market access. Commercial success still depends on funded mandates and investable products.
LSEG adds analytics to its index franchise
On 9 March 2026, LSEG launched new ESG scores and sustainability analytics using 220 standardised indicators, with overlays for controversies, sovereign ESG risk and green revenues. [29]
FTSE Russell’s 14 May 2026 Memorandum of Understanding with Planetrics proposes indices using physical and transition climate scenarios across asset classes. Launches were envisaged for later in 2026; these remain a development plan in the evidence reviewed here. [30]
Blossom’s funded portfolios and trading instruments give FTSE Russell an established route to implementation. Adding more precise climate and ESG inputs could extend that franchise as clients refine their portfolio objectives.
Sources and evidence notes
Numbers in the article link to this register. Dates distinguish announcements from the periods measured. Company plans retain their announced status; interpretation is FMI analysis. No full‑year 2026 flow outcome is implied.
[1] FTSE Russell in collaboration with SGX | 3 September 2026; research covering Q2 2026
Growing corporate engagement and ESG progress in Japan
Opening case study. Futures figures are approximate dollar notional values from Exhibit 6, page 8; the 40–45% growth estimate allows for the December bar sitting slightly above US$100 million. Q2 excess returns of −46 and −347 basis points are reported in Exhibits 4 and 5, pages 6–7.
[2] FTSE Russell | 25 February 2025
Confirms the 2017 and 2022 Japanese launches, GPIF use and January 2025 launch of the two global equity series.
[3] Government Pension Investment Fund | FY2025 annual report published in 2026
Blossom allocations and ESG investment rebalancing
Printed pages 69 and 77: allocations at 31 March 2026 and ESG investment rebalancing.
[4] FTSE Russell and Japan Exchange Group | 20 May 2025
Blossom Japan collaboration and TOPIX alignment
Announces FTSE JPX naming and use of TOPIX constituent information from the December 2025 rebalance.
[5] FTSE Russell | Product range reviewed 1 October 2026
FTSE Blossom Fixed Income Index Series
Describes the Japanese and global corporate bond benchmarks and their links to Blossom equity constituents. This is not a 2026 launch claim.
[6] MSCI | Historical launch date 1 May 1990
Official index record supplies the launch date.
[7] S&P Dow Jones Indices | 13 December 2024
Dow Jones Sustainability Indices review
Historical record confirms the global sustainability index family began in 1999.
[8] FTSE Russell | 23 April 2026
FTSE4Good twenty fifth anniversary review
Confirms the 2001 launch of FTSE4Good.
[9] United Nations | 27 April 2006
Launch of the Principles for Responsible Investment
Historical institutional milestone.
[10] ESMA | 2019 regulation and 2020 standards
Climate benchmarks and ESG disclosure
Distinguishes EU Climate Transition and Paris‑aligned Benchmarks and their methodology requirements.
[11] Morningstar Manager Research | 31 January 2022
Global sustainable fund flows Q4 2021
Contemporaneous boom‑period figures. Pages 1 and 2 also document changes to the sustainable fund universe.
[12] FTSE Russell | 30 January 2023
Sustainable index performance in 2022
Contemporaneous review of interest‑rate, valuation and sector effects; performance varied across sustainable index designs.
[13] Morningstar | 3 February 2026
Full year 2025 sustainable fund review
Reported 2025 and 2024 flows; explains transfers from pooled funds to bespoke ESG segregated accounts.
[14] Morningstar Manager Research | Q2 2026 data
Full quarterly report hosted by ETicaNews
Primary research in a public mirror. Pages 6, 10, 19 and 20 support global flows, the active/passive split and smart‑grid fund concentration.
[15] FTSE Russell | September 2026
Ninth annual sustainable investment asset owner survey
Survey of 402 asset owners in 24 countries. The full report, especially pages 10 and 14, supports custom‑index adoption and the sample description.
[16] Reuters | 4 August 2026
Sustainable fund launches and closures
Reports 13 European sustainable fund launches and 64 closures in Q2 2026.
[17] Osmosis and STOXX | 1 October 2026
Launch of the 48 index factor suite
Announcement of the launch and integration of resource efficiency into portfolio construction.
[18] Bloomberg via PR Newswire | 3 September 2025
Screened Choice equity index launch
Company announcement describing six configurable exclusion modules and 66 initial indices.
[19] Impact Cubed | 30 July 2025
J P Morgan Mansart iCubed fund launch
Confirms the fund, Impact Cubed design role and Solactive administration.
[20] Solactive | 27 February 2026 methodology
Global Corporate Paris Aligned Index Family
Current methodology documents the continuing fixed income climate offering; a methodology date is not a new launch date.
[21] MSCI | 3 August 2026
Completion of the First Street acquisition
Completed acquisition of physical climate risk data and analytics provider.
[22] Morningstar Sustainalytics | 24 June 2026
Physical climate risk collaboration with XDI and Veridion
Development collaboration to connect physical assets, climate hazards and financial materiality.
[23] MSCI | 21 July 2026
Second quarter and six month results
Sustainability and Climate segment revenue, net sales and retention. These are not ESG index licensing revenue figures.
[24] Euronext | 14 September 2026
Sustainability Week and new Athens ESG indices
Announces the Athens ESG and Athens ESG Tilted indices using Sustainalytics data.
[25] SIX | 1 April 2026
Selection combines size, liquidity and Inrate ESG Impact Ratings.
[26] Intercontinental Exchange | 8 June 2026
ICE Data Indices receives ESMA recognition
Recognition maintains EU use of 100 Climate Transition and Paris‑aligned Benchmarks.
[27] S&P Dow Jones Indices | Renaming effective 10 February 2025
Sustainability index name changes
Official announcements and FAQ supporting the 2025 index renaming and its connection with fund naming guidelines.
[28] S&P Dow Jones Indices | 23 April 2026
S&P 500 Scored and Screened rebalance
Constituent changes effective 1 May 2026.
[29] LSEG | 9 March 2026
New ESG scores and sustainability analytics
Confirmed product launch, standardised indicators and optional analytical overlays.
[30] FTSE Russell and Planetrics | 14 May 2026
Proposed climate scenario index partnership
Memorandum of Understanding. Anticipated launches later in 2026 are a stated plan, not confirmation of a completed launch.