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The future(s) of ESG

Release date: 12 Feb 2019 | Eurex Exchange, Eurex Clearing

The future(s) of ESG

By Zubin Ramdarshan, Head of Equity & Index Product Design at Eurex
Randolf Roth, Member of Eurex Frankfurt Executive Board, responsible for market designZoom

Zubin Ramdarshan, Head of Equity & Index Product
Design, Eurex

The New Year is only a few weeks old, and at Eurex, we already reached a major milestone. Later in February, we will launch three new products with which we will kick off the future(s) of ESG investing. I am excited to share this news with you as for us the launch means that we are entering a new segment to better serve market participants that focus on sustainability.

Given our central place in the financial infrastructure ecosystem, we have the capability – and I would say the responsibility – to encourage investment flows towards sustainable and socially responsible companies. With that aim in mind, we launch three index futures based on responsible investment, climate impact and low carbon themes. The underlying indices are based on existing liquid benchmarks, and they fit into existing trading infrastructure.

In detail, we deliver:

  • Cost-efficient access to liquid benchmarks with an ESG mindset instead of capital intensive ETFs and/or customized structured products
  • Simple and fast integration into existing trading infrastructure as the new ESG Futures have the same known, standard Eurex equity index contract specifications
  • The benchmark index, STOXX Europe 600 ESG-X, shows a risk-return profile and reduced tracking error similar to the parent index
  • Adapted solution for asset managers with strict mandates to achieve ESG compliance 
  • New futures are based on very liquid key benchmarks STOXX Europe 600 Index (SXXP) with responsible investment criteria, climate impact and the EURO STOXX 50 (SX5E) with low carbon focus.
  • ESG Futures are eligible for portfolio margin offsets against other Equity & Index (including Dividend) products using Eurex’s risk system technology Prisma.
  • Liquidity Provider Incentive scheme to be offered to support on screen price provision

In my opinion, going forward, all benchmarks will apply ESG criteria. The theme is here to stay, and at Eurex, we are looking forward to adding more index products to our new ESG family in the near future.

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