Stockholm (NordSIP) – As planned, Eurex announced the launch of the new STOXX USA 500 ESG-X Index Futures, the first exchange-listed derivative that covers the U.S. market while excluding thermal coal extraction and coal-fired power plants.
“We want to offer our clients the greatest possible flexibility in ESG investments. Expanding our offering to the U.S. equity market is therefore the next logical step,” Michael Peters, Member of the Eurex Executive Board. “Other regions and markets will follow in early March with the launch of further ESG contracts.”
As discussed in NordSIP’s December Systematically Sustainable Insights report, the USA-based ESG index futures follows the successful launch of Futures and Options indexes in Europe during 2019. The STOXX Europe 600 ESG-X Index Futures, launched on 18 February 2019, based on STOXX’s exclusion methodology, covers more than 700,000 contracts with a notional value of over EUR 10 billion. According to Stoxx, in December 2019 alone, over 183,000 FSEG contracts exchanged hands-on Eurex worth a notional value of €5.7 billion, the most on both counts for any month since launch in February 2019.
Eurex also launched the STOXX Europe 600 ESG-X Index and STOXX Europe ESG Leaders Select 30 EUR Index on 21 October 2019, to allow investors to trade options tracking ESG strategies. According to Eurex, at the end of 2019, 3000 ESG option contracts worth €46 million were outstanding on the exchange. Consistent with these expectations, market consultations suggest that liquidity and on price provision is an important factor for trading these contracts. According to Eurex, there has been strong client interest from the Nordic market.
“With the market becoming increasingly focused on sustainable investing, we are excited by this new initiative from Eurex and look forward to bringing these new products to our clients,” Andrew Fisher, Managing Director at Goldman Sachs, commented at the time. “We believe these options will offer market participants a good toolkit to manage their risk as the market grows in this area.”
The STOXX USA 500 ESG-X uses a free-float market cap weighting similar to its parent index. Products in the ESG-X index family are created by screening benchmarks for controversial weapons, tobacco and thermal coal, violators of the UN Global Compact principles of human and labour rights, the environment, business ethics and anti-corruption. Sustainalytics provides the underlying ESG used in the screening process.