The investment solutions provider recently made headlines with the Japanese Government Pension Investment Fund (GPIF), who will leverage their suite of ESG data.

The company also announced a partnership with MerQube to create bespoke next generation ESG indices using their 3D-ESG methodology which optimises risk, return and impact simultaneously.

SRP spoke to Antonia Lim (pictured), CIO, Impact Cubed, to discuss the state of play in the ESG space and the importance of working with quantitative, granular data to develop new investment strategies that are aligned with sustainable and ESG goals.

We see a clear pivot away from relying on composite ESG ratings towards a deeper use of empirical, granular, outcome-based data - Antonia Lim

Looking at how the ESG landscape is evolving for institutional investors against a backdrop of political shifts and geopolitical tensions, Lim notes that “while political narratives around ESG have undoubtedly intensified, especially in the US, ESG itself is not disappearing”.

“Rather, how institutional investors incorporate sustainability considerations is evolving,” she said. “We see a clear pivot away from relying on composite ESG ratings towards a deeper use of empirical, granular, outcome-based data.”

According to Lim, investors are recognising that ratings often obscure underlying risks and opportunities, whereas factual datasets — like the ones offered by Impact Cubed which covers over 2,300 products and services from every listed company, globally — enable direct integration of sustainability factors into risk and return frameworks.

“Much of what we enable — custom baskets, sustainability attribution, factor-based portfolio construction — simply cannot be achieved through traditional ESG ratings,” said Lim.

Given this shift, what does best practice ESG integration looks like today?

Antonia Lim: Best practice now involves integrating sustainability considerations alongside risk and return, not treating them as separate factors. We developed a 3D approach explicitly to incorporate impact within portfolio construction, providing a more holistic investment framework.

Using our factorised ESG data, it connects top-down macro portfolio and single security analysis, so we can model entire universes, bespoke stock baskets, and fund peer groups, helping clients visualise and optimise across risk, return, and impact dimensions simultaneously.

This enables better index and portfolio creation by identifying new efficient frontiers, as well as peer benchmarking — capabilities that traditional risk-return frameworks simply cannot deliver.

Could you share examples where Impact Cubed indices have been used to structured investable products?

Antonia Lim: Very recently, we developed the bespoke underlying index launched in a new UCITS fund for a large European Pension Plan.  Because we could lean into both our expertise in ESG data and quant investment,  we could ensure the fund optimally met both the client’s sustainable impact objectives and practical derivatives trading requirements.  It also happily led to an industry award (IPE Silver) for the client! 

We’ve partnered with index calculation agents too. For example MerQube have collaborated with us to launch biodiversity-aligned indices, tailored to investors seeking diversification while addressing nature-related risks. This was then structured into a note for a global Wealth Manager.

These include the MerQube Impact Cubed Critical Minerals, MerQube Impact Cubed Developed Markets Biodiversity, MerQube Impact Cubed Water Leaders Index and MerQube Impact Cubed Transatlantic Biodiversity Equal Weighted Index, among others.

Risk management remains a critical focus for investors. How is this reflected in your work?

Antonia Lim: Our research shows that integrating sustainability factors improves resilience. Traditional benchmarks, often rely heavily on capitalisation-weighted constructions. This can unintentionally concentrate portfolio risk irrespective of sustainability performance or valuation risks.

Our approach intentionally balances exposures across sectors, geographies, and sustainability factors. This diversification – together with our extensive data coverage across assets - strengthens tail risk management, delivering portfolios that are more resilient to market shocks and offering a more stable foundation for long-term investment strategies.

To share a practical example, during the tariff announcement shock in 2025, our Solactive Global Equity Select Index recorded a 1.6% performance advantage over the MSCI Paris-Aligned Benchmark (31 Dec 2024 to 4 April 2025, Total Return). This divergence highlights not only the strength of our ESG factor integration but also the importance of robust portfolio construction methodologies.

In thematic investing, which sustainability trends are seeing the strongest demand from your clients?

Antonia Lim: Themes focused on real-world infrastructure and resource transitions are gaining interest, especially critical minerals like lithium, nickel, and cobalt. The International Energy Agency projects that demand for these minerals could multiply between 10 to 40 times between 2020 and 2040 due to their importance in electrification and clean energy technologies.

This demand surge is being reinforced by regulation, such as the US Inflation Reduction Act and the EU’s Critical Raw Materials Act, both aiming to secure supply chains. In response to these structural drivers, we partnered with MerQube to create the Impact Cubed Critical Minerals Index, applying both thematic exposure and sustainability screens (e.g., exclusion of UNGC violators and controversial weapons involvement).

Beyond critical minerals, we also see growing attention towards biodiversity protection and water management infrastructure, particularly where upcoming regulatory frameworks such as TNFD provide clearer guidelines for investors.

Structured product providers are coming to us due to their need for increasingly rapid development of baskets and indices.  Our breadth of data, depth of corporate product and services knowledge, and practitioner quant expertise, means we can offer targeted exposure to these high-growth, system-critical areas, coupled with strong diversification and risk management.

What areas of development is Impact Cubed prioritising over the next year?

Antonia Lim: Our primary focus is delivering a cohesive, end-to-end investment process that enables clients to move seamlessly from impact data to investment products. As investors increasingly prioritise tangible, outcome-based measures over opaque ESG ratings, we are expanding our capabilities across custom indices, thematic baskets, and structured product-ready solutions.

We are building more modular, scalable tools to meet specific client needs — allowing for customisation across data, fund construction, benchmarking and reporting. This flexibility is underpinned by our quant heritage and deep portfolio construction expertise, which most ESG data providers cannot replicate.

This article is an abstract from the ESG, Thematics & Decrement Indices chapter of the SRP Index Report 2025. Click in the link to download the first two chapters of the report.