Six years ago this month, UBS launched the EURO STOXX 50 ESG ETF, offering investors a first option to access the novel, sustainable version of the Eurozone’s flagship benchmark.
The underlying EURO STOXX 50® ESG index’s methodology is simple: it excludes companies in controversial activities and up to 20% of the least sustainable constituents from the EURO STOXX 50® benchmark, reducing reputational and idiosyncratic risks.[1][2] Replacements are drawn from the broader EURO STOXX® index, selecting companies with the largest market capitalization adjusted by ESG score from the same ICB Supersector as excluded securities.
The methodology meets the standard exclusions of leading asset owners and integrates ESG parameters positively. The replacement process ensures two things: it increases the portfolio’s sustainability profile — potentially benefitting its risk-return profile vis-a-vis the benchmark — and it preserves sector diversification and a similar industry profile to the benchmark.
Figure 1: EURO STOXX 50 ESG methodology
A milestone in the sustainability journey
The launch on July 25, 2019, responded to the strong commitment from investors, asset owners and money managers in Europe as they move to sustainable practices and to prepare portfolios for the risk and opportunities that arise as regulators and societies heighten their scrutiny of companies’ products and operations. The combination of ESG exclusions and integration in one systematic methodology was a step further from exclusions-based responsible-investing benchmarks, yet the selection methodology meant the ETF kept a similar composition to its benchmark and was therefore fit as a ‘core replacement.’
The introduction of the ETF preceded by just over one year the launch of futures on the EURO STOXX 50 ESG on Eurex, which expanded the liquidity and investable universe around the index.
The EURO STOXX 50 ESG ETF has grown to more than EUR 2 billion in assets since launch[3], with around EUR 1 billion amassed just in 2025 as investors have turned to a region with relatively low valuations and a diversified industrial profile.
New rules
Since launch, STOXX has updated the methodology behind the EURO STOXX 50 ESG index to adapt to shifting investor needs and evolving regulations. The changes were based on market consultations to accurately and timely reflect investors’ preferences and standard practices.
In June 2021 and in March 2023, stricter exclusions were applied to the index methodology aimed at keeping the index aligned with evolving sustainability practices and new regulation such as the Sustainable Finance Disclosure Regulation (SFDR) and the Markets in Financial Instruments Directive II (MiFID II).
In March this year STOXX implemented changes that aligned the index with ESMA’s new guidelines on funds’ names using ESG or sustainability-related terms. Screens devised for the EU Paris-aligned Benchmarks (PAB) were added, excluding companies involved in the exploration, mining, extraction, distribution or refining of hard coal and lignite, oil fuels and gaseous fuels, and in high carbon-intensity electricity generation.
“Responsible investing has evolved in the past six years, so it’s important to maintain constant dialogue with clients and stay aligned with their shifting objectives and needs,” said Dag Rodewald, Head Passive & ETF Specialist Sales, Germany and Austria, at UBS. “The EURO STOXX 50 ESG ETF aims to efficiently meet these goals and facilitate a sustainable transition for European portfolios.”
Figure 2: Exclusions and replacements — Constructing the EURO STOXX 50 ESG index
Source: STOXX. Data as of June 27, 2025.
The index is weighted by free-float market capitalization, with cap factors to ensure a weighted-average ESG score that exceeds that of the EURO STOXX 50 index minus its worst 20% components.
Performance
Figure 3 presents a comparative analysis of sustainability, risk and return metrics between the EURO STOXX 50 ESG index and its benchmark. The ESG index shows an improvement in the two core objectives of raising the portfolio’s ESG score and eliminating exposure to controversial activities. There is also a decrease in the carbon intensity and an improvement in the green-to-brown ratio of companies’ revenues, both a result of the recently added PAB filters.
Regarding returns, the ESG index shows a higher annualized performance over three and five years, with slightly lower volatility. The long-term tracking error to the benchmark is 2%.
Figure 3: ESG, risk and return metrics
Source: STOXX. Data as of April 18, 2025.
The EURO STOXX 50 ESG’s methodology ensures the sector exposures of the index are not far off those of the benchmark (Figure 4). The index also shows a similar country allocation to the EURO STOXX 50.
Figure 4: Sector and country comparison
Source: STOXX. Data as of May 30, 2025.
This sector allocation has been of significant relevance for investors of late as it offers more diversification than do benchmark indices in the US. The STOXX® USA 500 index, for example, has 35% of its portfolio concentrated in Technology shares, more than twice the allocation to the sector in the EURO STOXX 50.
Through March, a net EUR 42 billion was invested in EMEA-focused ETFs, or 8.1% of existing assets under management (AuM). By comparison, EUR 98 billion were invested in US-focused ETFs, only 1.5% of AuM at the start of the period.
“European investment funds are benefiting this year as the region is seen as having more quality and defensive characteristics than the US,” said Sahand Taghizadeh, Head of Investable STOXX Benchmarks. “Very high valuations in the US, and rising macroeconomic volatility, has driven more flows into Europe.”
Elsewhere, the EURO STOXX 50 ESG keeps the same liquidity and tradability characteristics as its benchmark. For a deeper analysis of this topic, as well as a study on returns attribution and the impact of stock replacements in the ESG index, visit a STOXX white paper from December 2020.
Sustainability as a must-have
More and more investors have turned to sustainable versions of established benchmarks as their fiduciary role increases and more regulation kicks in.
The EURO STOXX 50 ESG ETF offers a simple strategy to enhance the sustainability of a core Eurozone equities portfolio, based on a transparent and rules-based methodology to integrate ESG data into stock selection, while keeping similar risk-return characteristics to the benchmark.
[1] Removals happen in two steps: first, exclusionary screens are applied. Thereafter, companies with the lowest ESG scores are excluded until a total of 20% of holdings of the initial EURO STOXX 50 components (included those removed as part of exclusionary screens) are removed.
[2] Screenings use data from ISS Sustainability.
[3] Source: STOXX. Data through May 19, 2025.