[ T H O U G H T L E A D E R S H I P | E U R O N E X T ] lowest ranking in terms of governance assessment .
We then apply the UN GC exclusions , which include companies linked to coal extraction , controversial weapons , tobacco , among other things . We also exclude companies that have been involved in a major controversy . It ’ s then we preserve the sectorial representation of the mother index , which makes the ESG 80 index representative of the economy , a key component to this . It ’ s a best-in-class approach we take for each sector . What I mean by that is we have an energy transition score , which represents the will and concrete actions of companies engaging with climate action and energy transition . From this , we keep 80 stocks based on market cap to preserve the largest companies
“ We haven ’ t had a single reproach as to our strategy and methodology with this index .”
Charlotte Alliot , head of institutional derivatives , Euronext
and liquidity of the index , and high correlation with non-ESG standard benchmarks . When designing the index , we also wanted to ensure that the methodology can be suited to all regulations that investors have at all levels . It reshuffles on a yearly basis , but there will be reviews undertaken every three months in case there is a controversy , in which case a company might be excluded .
This is an index with convictions . It ’ s proactive in terms of taking into consideration how proactive companies really are with issues such as climate change . I have to say , the methodology has been very well-received by market participants , and we haven ’ t had a single reproach as to our strategy and methodology .
When did Euronext launch its futures derivatives contract based on the ESG index ? CA : We launched the index mid- April and in early June we launched the Euronext Eurozone ESG Large 80 Index Future , which allows investors to gain exposure to the Eurozone ’ s sustainable economy supporting climate action . It also provides an effective hedging tool on related ETFs or structured products .
We truly believe the futures contract has the most attractive pricing in the industry in terms of an ESG contract , and we wanted attractive pricing because as an exchange , we have a vital role to play in facilitating the transition of the economy . As the European Commission has stated in the past , finance will be key at accompanying the transition of the economy .
“ We truly believe the futures contract has the most attractive pricing in the industry . We wanted attractive pricing because as an exchange , we have a vital role to play in facilitating the transition of the economy .”
Indices are a major part in this reallocation of assets and of the work towards sustainable finance , while derivatives act as further tools to facilitate the transition towards ESG indices . I think it ’ s important to note that the reallocation of assets , which we hope to facilitate , is a process which takes time . It ’ s a marathon , not a sprint .
We have the support of four market makers for the futures contracts , including BNP Paribas , DRW , Optiver and Societe Generale . All four of them have said they were keen to partner with us on this project due to our strong vision on ESG . They are also extremely committed to the development of sustainable finance , and we are really happy to have them on board as partners . This is a longterm commitment and with our governance approach allowing us to evolve the product in the future , we tick all of the boxes to power
“ Four market makers were keen to partner with us on this project due to our strong vision on ESG .”
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