How S&P and Morningstar’s SDG-Aligned Indices Are Reshaping Global and Indian Investment Thinking

Across the globe, investors are steadily shifting their focus towards investment options that also serve the people and the planet. This shift is no longer limited to ESG filters—an increasingly popular benchmark now is whether a company actively contributes to the United Nations Sustainable Development Goals (SDGs). Leading this trend are SDG-aligned indices created by firms like S&P Dow Jones Indices and Morningstar, which are helping to channel capital towards companies whose business models are directly tied to solving global challenges.

The SDGs—17 global goals adopted by all UN member states—are an urgent blueprint for tackling poverty, inequality, climate change, and more. Unlike traditional ESG scores, which assess how a company manages environmental, social, and governance risks, SDG alignment focuses on the positive outcomes of a company’s products and services. For example, a firm building affordable solar energy solutions contributes directly to SDG 7 (Affordable and Clean Energy); a company enabling low-income lending supports SDG 1 (No Poverty).

Indices such as the S&P SDG Global Select Index and Morningstar’s Sustainable Activities Involvement Indexes identify and include companies that generate significant revenues from SDG-aligned activities. These indices are used to build exchange-traded funds (ETFs), mutual funds, and other products aimed at investors seeking to align their portfolios with global development goals.

This matters in India for several reasons. India is among the largest contributors to global SDG progress by population, and its national priorities—such as clean energy access, gender equality (SDG 5), inclusive financial services, and quality education—map closely to core SDG themes. Indian companies active in these areas are increasingly showing up in global sustainable indices, enabling them to access international capital pools focused on impact. Furthermore, Indian investors, through platforms like mutual funds and fintech apps, are gradually being introduced to investment options linked to these global benchmarks.

Methodologies for SDG-aligned indices typically use revenue mapping to assess alignment: how much of a company’s income comes from products or services tied to an SDG. This approach is supported by independent research providers like Sustainalytics or ISS-ESG, who verify company-level data. Indices often include additional filters like excluding companies involved in controversies or harmful activities, and sometimes cap exposure to certain sectors to ensure diversification.

For Indian regulators and institutions, SDG-aligned investing aligns with broader financial reforms. SEBI’s push for Business Responsibility and Sustainability Reporting (BRSR) is helping Indian companies report sustainability metrics more systematically. This is likely to improve their chances of being recognized in SDG-aligned benchmarks and unlock capital from global ESG funds. At the same time, Indian regulators and exchanges are monitoring global trends like Europe’s SFDR and the ISSB framework to build robust domestic standards.

Still, challenges persist. There’s no universal agreement yet on how to measure SDG alignment, and companies—especially in emerging markets—may under-report or lack the tools to properly disclose impact. Retail investors often have limited access to SDG-specific products or may struggle to understand what sets them apart from other sustainable or ESG options. Greenwashing remains a risk when indices rely on poor data or loose interpretations.

Despite this, momentum is clearly on the side of SDG-aligned finance. As capital markets shift to accommodate climate risk, demographic change, and rising inequality, SDG indices provide a practical and credible way to assess which businesses are positioned to thrive by doing good. For Indian investors, aligning with such benchmarks offers not only a way to build wealth but also a way to participate in the country’s and the world’s progress.