Eurex Launching Derivatives on ESG Indexes
In a further expansion of the tools available to ESG investors, Deutsche Börse Group’s derivatives exchange Eurex announced today the launch of a new series of futures and options on the EURO STOXX 50 ESG Index, and the DAX 50 ESG Index. The new contracts will be available on November 9.
Both of the ESG indices underlying the new derivatives were developed by Deutsche Börse Group’s index and analytics provider Qontigo. According to Eurex, the new contracts represent the first derivatives based on indices that incorporate ESG scores, going beyond the current generation of ESG-linked derivatives, which primarily utilize negative screening strategies.
Randolf Roth, Member of the Executive Board of Eurex, said:
“Given the current momentum in the ESG space, we believe it is the right time to complement our family of screened products by a staged roll-out of integrated ESG offerings.”
The EURO STOXX 50 ESG Index is based on the EURO STOXX 50 Index, and applies a set of standardized ESG exclusion screens with the aim of reducing reputational and idiosyncratic risks. In addition to the exclusion screens, 10% of companies with the lowest ESG scores are excluded and are replaced by companies with a higher ESG score from the same ICB Supersector as the excluded companies. The index also excludes companies that Sustainalytics considers to be non-compliant with the Global Compact Principles, those involved in controversial weapons or tobacco production as well as companies that derive revenues from thermal coal extraction, and exploration, or generate power from thermal coal.
The DAX 50 ESG tracks the performance of the 50 largest, most liquid German market stocks that have comparably good performance based on their ESG criteria. The index utilizes two complementary approaches to incorporate ESG principles into the selection criteria, including negative screens for companies that are involved in controversial or unsustainable activities, and positive screens based on ESG scores.
Rodolphe Bocquet, Global Head of Sustainable Investment at Qontigo, said:
“The EURO STOXX 50 ESG Index and the DAX 50 ESG Index both represent highly liquid solutions for asset owners who are looking for cost-effective ways to integrate sustainable factors in the core of their investments. These indices are well suited for derivatives and are an important part of the comprehensive Qontigo sustainable investment ecosystem.”