Understanding Sustainable Finance through ESG Indexes

April 11, 2025 by Pablo COHEN

Understanding Sustainable Finance through ESG Indexes

In this article, Pablo COHEN (ESSEC Business School, Master in Strategy & Management of International Business (SMIB), 2024–2025) explores how sustainable finance is reshaping investment strategies through ESG indexes.

Introduction and Context

For decades, success was measured through financial indicators. Profits defined companies, and GDP per capita ranked nations. But as Robert F. Kennedy pointed out, GDP “measures air pollution and cigarette advertising… and ambulances to clear our highways of carnage.” It reflects economic activity, not societal well-being”.

Our actions shape the climate, ecosystems, and social outcomes — and those same forces now pose real risks to economies. France may have a far higher GDP per capita than El Salvador, but which emits more carbon per citizen? Which has a credible plan for net-zero by 2050? These questions are more relevant to long-term sustainability.

To enable meaningful comparisons, global bodies like the UN and EU have created frameworks and standards for sustainability reporting. Tools such as the EU Taxonomy, SFDR, and CSRD bring structure and consistency to ESG disclosures, helping investors assess corporate impact and redirect capital toward sustainable outcomes. If we don’t change what we measure, we won’t change what we prioritize — or what we build.

How ESG Indexes Work

We have an impact on the world, and the world has an impact on us. That’s the essence of double materiality — a foundational concept in sustainable finance. Sustainability risks, whether physical (like climate disasters) or transitional (like policy shifts), can directly affect financial performance through credit risk, operational disruption, legal exposure, and reputational damage.

Just as external events shape a company’s bottom line, financial decisions influence the environment and society. This two-way relationship is increasingly recognized by regulators and investors alike. Navigating it requires tools that make ESG performance measurable, comparable, and investable. This is where ESG indexes come into play.

ESG indexes allow investors to evaluate companies based on their sustainability profile. Depending on their design, they may exclude controversial sectors, highlight ESG leaders, track themes like clean energy, or align with climate targets such as the 1.5°C scenario. Examples include the MSCI ESG Leaders and Climate Paris Aligned Indexes, the S&P 500 ESG Index, FTSE4Good, and the Dow Jones Sustainability Index. These indexes are used not only as benchmarks, but as a basis for constructing portfolios that reflect long-term sustainability goals.

The growth of ESG indexes and sustainable funds has mirrored the rising demand for more responsible investment strategies. The following chart shows how both active and passive sustainable funds have surged over the past decade:

ESG Fund Growth Chart.

Source: Morningstar Direct.

ESG in Practice and Market Performance

Index construction starts with exclusions — companies involved in fossil fuels, weapons, or major ESG controversies are filtered out. Then comes ESG scoring, based on data from corporate disclosures, regulatory filings, and third-party assessments. Companies are evaluated across environmental impact, social responsibility, and governance quality. This might include emissions intensity, labor practices, or board independence. Based on these scores, indexes select and weight constituents and are rebalanced periodically to reflect updated data.

The MSCI Climate Paris Aligned Index is designed to align with a 1.5°C scenario. It reduces both physical and transition risks by excluding fossil-fuel-intensive companies and emphasizing those with low emissions and strong climate governance. Compared to its parent index, the MSCI ACWI, it includes fewer companies but achieves a 50% reduction in portfolio carbon intensity. It’s a forward-looking tool that anticipates tightening regulations and evolving investor expectations.

Some ESG funds have even outperformed traditional benchmarks like the S&P 500. The chart below shows that several ESG funds delivered significantly higher year-to-date returns in early 2021:

ESG Fund performance compared to the S&P 500 index.

Source: S&P Global Market Intelligence.

This outperformance isn’t just recent. In 2019, sustainable large-blend index funds consistently beat the S&P 500 — with many delivering returns above 32%, as the following chart demonstrates:

Sustainable Funds Performance (year 2019).
Sustainable Funds 2019 Performance
Source: Morningstar Direct.

The rise of ESG is also visible in fund flows. More sustainable funds are being launched each year, and investor inflows have reached record levels — confirming that ESG isn’t just a trend, it’s a lasting shift in investment priorities.

Why should I be interested in this post?

As an ESSEC student preparing for a career in finance, understanding sustainable finance is no longer optional. ESG principles are reshaping how capital is allocated, how companies report, and how investment strategies are built. Whether you’re pursuing a role in banking, asset management, consulting, or entrepreneurship, knowledge of ESG frameworks and sustainable indexes will be essential for making informed, future-ready decisions in a rapidly changing financial landscape.

Useful resources

Morgan Stanley (2023) Sustainable Funds Outperformed Peers in 2023

IEEFA ESG Investing: Steady Growth Amidst Adversity

Morgan Stanley (2024) Sustainable Funds Modestly Outperform in First Half of 2024

IEEFA ESG Funds Continue to Outperform

S&P Global Most ESG Funds Outperformed S&P 500 in Early 2021

Morningstar U.S. ESG Funds Outperformed Conventional Funds in 2019

The Economist American Sustainable Funds Outperform the Market

About the author

This article was written in April 2025 by Pablo COHEN (ESSEC Business School, Master in Strategy & Management of International Business (SMIB), 2024–2025).

My internship experience in Business Development at Pelikan Mobility

April 7, 2025 by Pablo COHEN

In this article, Pablo COHEN (ESSEC Business School, Master in Strategy & Management of International Business (SMIB), 2024–2025) shares insights from his internship experience in Business Development at Pelikan Mobility.

About the company

Pelikan Mobility is a French startup founded in 2022 that provides tech-enabled leasing solutions for electric vehicle (EV) fleets, emphasizing an EV-native and operations-centric approach. The company leverages digital twin technology and optimization algorithms to offer customized, cost-effective leasing options that enhance the productivity and efficiency of mission-critical, last-mile, and middle-mile commercial fleets.

In March 2024, Pelikan Mobility raised a €4 million seed funding round from investors including Pale Blue Dot, Frst, and Seedcamp. The company’s mission is to make commercial fleet electrification scalable and cost-effective by addressing inefficiencies in EV adoption and providing solutions related to fleet management, charging infrastructure, energy optimization, and route planning.

Logo of Pelikan Mobility.

Source: the company.

My internship

As an intern, I joined the Business Development team at a time when Pelikan Mobility had fewer than 10 employees. The startup environment allowed me to participate in various cross-functional activities beyond my designated team. My primary focus was on analyzing the annual and CSR reports of prospective clients, identifying operational data related to their vehicle fleets and emissions strategies.

My missions

My role involved conducting in-depth research on companies’ operations to estimate their Scope 1, 2, and 3 emissions and assess how aligned they were with their publicly stated sustainability roadmaps. By examining the size and composition of their vehicle fleets and analyzing their emission reduction goals, I was able to generate strategic reports evaluating their potential as Pelikan clients. These reports were used to segment companies by sector—such as utilities, maintenance, and delivery—and tailor use cases and pitch decks accordingly.

The objective was to demonstrate that by optimizing EV use through Pelikan’s tools, companies could significantly reduce their emissions while increasing their return on investment by lowering total cost of ownership (TCO) over time. Our analyses guided companies in selecting the most operationally suited EV models, thereby improving vehicle lifetime value and reducing long-term costs.

Required skills and knowledge

Success in this role required familiarity with emissions reporting methodologies and a solid understanding of how to read and interpret annual reports. I had to be well-versed in corporate sustainability roadmaps and regulations, particularly French mandates that require companies to incrementally electrify their fleets. Awareness of client motivations—mainly cost reduction or revenue growth—was key to positioning Pelikan’s offer persuasively. Demonstrating profitability first and sustainability second was essential in our outreach efforts.

What I learned

This internship gave me a front-row seat to the intersection of regulation, sustainability, and business operations. I discovered how procurement officers adopt new technologies—not just through cost-benefit analysis, but also through trust, relationship-building, and presentation. I gained a deeper understanding of how regulation shapes corporate decision-making and realized the importance of awareness and education in encouraging sustainable transitions. Just like in fine dining, how the idea is presented is often as important as the idea itself.

Financial concepts related my internship

I present below three financial concepts related to my internship: total cost of ownership, regulatory risk, and sustainability reporting.

Total Cost of Ownership (TCO)

TCO refers to all costs associated with acquiring and operating a vehicle over its lifespan. For EV fleets, this includes not only the purchase or lease cost but also charging infrastructure, electricity prices, maintenance, downtime, and resale value. At Pelikan, our role was to show that, despite higher upfront costs, the long-term operational savings with EVs often made them more cost-effective than internal combustion engine (ICE) vehicles.

Regulatory risk

Companies today face increasing regulatory pressure to decarbonize. Non-compliance with environmental laws—such as failing to electrify a mandated percentage of fleet vehicles—can lead to financial penalties or reputational harm. Our value proposition directly addressed this risk by helping companies stay compliant through optimized EV integration, reducing exposure to regulatory fines.

Sustainability reporting

Reliable measurement and reporting of emissions from both ICE vehicles and EVs are essential for effective sustainability disclosure. We helped companies track and report their Scope 1 emissions (from owned fleets) accurately. This data was not only critical for compliance but also for setting realistic, measurable goals in their CSR strategies.

Why should I be interested in this post?

This post offers a firsthand look at how sustainability, operations, and finance intersect in a startup environment. If you’re interested in working in sustainable finance, ESG consulting, or mobility innovation, this experience demonstrates how regulatory knowledge, financial analysis, and persuasive communication come together in real-world client engagement. The strategic and technical skills developed here are highly transferable to roles in consulting, private equity, or corporate sustainability teams.

Useful resources

Pelikan Mobility

Tech.eu (21/03/2024) Pelikan Mobility Seed Funding Announcement

TechCrunch (21/03/2024) Pelikan Mobility is building a software-enabled commercial EV leasing solution

Charged EV (29/03/2024) Pelikan Mobility raises €4 million in funding for its EV fleet management software platform

About the author

This article was written in April 2025 by Pablo COHEN (ESSEC Business School, Master in Strategy & Management of International Business (SMIB), 2024–2025).