The international derivatives exchange Eurex is expanding its ESG segment in support of the strong global trend towards responsible investing with new contracts to be launched on 9 November. Eurex will add another European benchmark to its offering with futures and options on the EURO STOXX 50 ESG Index, as well as derivatives on the DAX 50 ESG Index, covering the German market for the first time.
ESG derivatives have an essential role in the transition towards a more sustainable economy as they help to more effectively align investment exposures to environmental, governance and social risk factors. With the addition of these new contracts, Eurex is going one step further in terms of methodology. These derivatives will be based on indexes incorporating ESG scores which means that in combination with screening out undesirable securities, ESG rankings are also considered as part of the selection process.
DAX 50 ESG Index companies must pass standard ESG screens linked to Sustanalytics’ Global Standards Screening (GSS), as well as not be involved in controversial weapons, tobacco production, thermal coal, nuclear power or military contracting. The base universe of the DAX 50 ESG Index is the HDAX universe making up the joint set of companies included in the DAX, MDAX and TecDAX.
The EURO STOXX 50 ESG Index is based on the EURO STOXX 50 Index, Europe’s flagship benchmark. The ESG version excludes companies, considered to be non-compliant with Global Standards Screening by Sustainalytics. In addition, the 10% of companies with the lowest ESG scores are excluded and replaced by companies with a higher ESG score from the same ICB (Industry Classification Benchmark) Supersector.