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Euronext ESG 80 Index Future :
Empowering investors in the fight against climate change
Head of institutional derivatives at Euronext , Charlotte Alliot , discusses the launch of the exchange group ’ s ESG 80 index , and how futures based on the benchmark can provide investors with exposure to the sustainable economy in the Eurozone .
What was the process in developing the Euronext Eurozone ESG 80 index ? Charlotte Alliot : We developed the ESG ( Environmental , Social and Corporate Governance ) index in partnership with Vigeo Eiris , which is part of Moody ’ s Group , and it tracks the 80 large companies that are truly leading the transition to a low carbon economy . It ’ s an interesting story really because the index was developed through a collaborative approach .
“ A group of market participants asked us to design a Eurozone ESG benchmark , but with strong convictions .”
22 // TheTRADE // Fall 2020
A group of market participants asked us to design a Eurozone ESG benchmark , but with strong convictions . They made the case that there are a lot of structured products on the market , but investors really need a public climate action benchmark that is representative of the economy , rather than an index only orientated towards performance . Asset managers are increasingly switching benchmarks and moving to ESG indices , and now more than ever the challenge for investors is sustainable investment .
We set out to create something that was truly ESG , with a focus on energy transition , but also strong social and governance components in alignment with the UN Global Compact ( UN GC ). We are also looking to form a user and experts committee , on the model of our national benchmarks , consisting of experts that will be able to advise on the evolution of the rulebook . This will allow us to adapt the index in the future so that it stays aligned with the evolving regulation .
How does the index function in terms of methodology ? CA : We start from the mother index , which is the Euronext Eurozone 300 , representing the largest market caps in the Eurozone , and then we apply the first set of exclusions . We exclude 20 % of companies with the lowest ranking in terms of social assessment , and then 20 % of companies with the