In February 2020, sustainable investing will reach a new chapter when Eurex lists futures on the STOXX® USA 500 ESG-X Index.
The STOXX USA 500 ESG-X Index is a benchmark for US equities that incorporates basic responsible exclusions and that was designed based on feedback from European asset owners.
STOXX’s ESG-X family is composed of versions of established STOXX benchmarks. They exclude companies in breach of the United Nations Global Compact principles of human and labor rights, the environment and business ethics. They also incorporate negative product-involvement screens for tobacco and controversial weapons (including anti-personnel mines), as well as an exclusion for thermal-coal mining and coal-fired power plants.
“Eurex’s STOXX USA 500 ESG-X futures will be the first listed derivatives covering the US market that include a screening for thermal-coal mining and coal-fired power plants,” said Willem Keogh, Head of ESG and Thematic Solutions at STOXX’s parent Qontigo. “Thermal coal is a very relevant issue as investors look more closely at their climate-related risks.”
STOXX cooperates with leading ESG data provider Sustainalytics for the screenings.
Eurex takes its ESG offering to a global level
The contracts on the STOXX USA 500 ESG-X Index mark the internationalization of Eurex’s ESG derivatives offering and are also the first listed futures to track a STOXX index with a US focus.
Successful precedent
The listing will take place exactly one year after the successful launch of futures on the STOXX® Europe 600 ESG-X Index (FSEG), which reached an open interest of more than 1 billion euros in notional value during the most recent roll period.
“Because we were looking for tradeable benchmark indices which are compliant with our responsible investment policy, we were among the first to trade Eurex futures on the STOXX Europe 600 ESG-X Index,” said Magnus Linder, Head of Derivatives at Swedbank Robur, one of Scandinavia’s largest asset managers. “Liquidity is most important and therefore we are very happy that the ESG-X range on Eurex is extended.”
ESG derivatives have shown good liquidity from the start. Over the last eleven months, about 500,000 of the contracts have exchanged hands, with more than half of the flow coming from end clients such as asset owners, and traded by more than 20 exchange participants.
“ESG derivatives have a huge potential for the mainstreaming of sustainable investing as they give our clients the ability to hedge and take positions while using fully-compliant sustainable trading instruments,” said Paul Vivier, Senior Trader at BNP Paribas. “We fully support this new future launch as liquidity will drive ESG derivatives growth.”
Building the road to sustainability
With responsible investing gathering pace, ESG indices are meeting the need for market-capitalization-weighted benchmarks that are in line with sustainable policies, finding their way to the core of the world’s largest portfolios. STOXX is proud to support the transition to a more responsible marketplace with traded securities that enhance transparency and liquidity and that respond to the needs of investors leading the way in this field.