Next Generation of ESG Derivatives Coming up

    Stockholm (NordSIP) – As investor demand for sustainable investment opportunities continues to grow, one of the important developments required to allow the market to mature is the rise of ESG derivative markets. Now, Eurex has announced that it will introduce futures and options on the EURO STOXX 50 ESG Index as well as derivatives on the DAX 50 ESG Index to cover the German market on November 9.

    In 2019, Eurex was the first exchange to launch derivatives contracts on ESG versions of the major STOXX European benchmarks. In February it launched the 2019 STOXX Europe 600 ESG-X futures and options, which were complemented by global regions beyond Europe in early 2020. According to Eurex, there are a total of almost 100,000 outstanding STOXX Europe 600 ESG-X futures and options contracts. The total traded notional amount on these contracts since launch is worth €20 billion.

    “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,” said Rodolphe Bocquet, Global Head of Sustainable Investment at Qontigo.

    Inflows into sustainable funds have grown during recent years.“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,” Randolf Roth, Member of the Executive Board of Eurex added.

    Based on the EURO STOXX 50 Index flagship benchmark, the EURO STOXX 50 ESG Index excludes companies that Sustainalytics considers to be non-compliant with Global Standards Screening. It also excludes the lowest 10% of companies ranked by ESG scores, replacing them by companies with a higher ESG score from the same Industry Classification Benchmark Supersector.

    The starting point for the DAX 50 ESG Index is the HDAX investing universe which includes companies covered by the DAX, MDAX and TecDAX indices. The German ESG Index also excludes companies that fail to comply with Sustainalytics’ Global Standards Screening (GSS), as well as those involved in controversial industries, including weapons, tobacco production, thermal coal, nuclear power or military contracting.

    Image by Nikolaus Bader from Pixabay

    Filipe Albuquerque
    Filipe Albuquerque
    Filipe is an economist with 8 years of experience in macroeconomic and financial analysis for the Economist Intelligence Unit, the UN World Institute for Development Economic Research, the Stockholm School of Economics and the School of Oriental and African Studies. Filipe holds a MSc in European Political Economy from the LSE and a MSc in Economics from the University of London, where he currently is a PhD candidate.

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