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Eurex plans to launch next generation of ESG derivatives



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.

Eurex ESG

Rodolphe Bocquet, Global Head of Sustainable Investment at Qontigo said:

Rodolphe Bocquet, Qontigo
Rodolphe Bocquet
Source: LinkedIn

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.

Randolf Roth, Member of the Executive Board of Eurex commented:

Randolf Roth, Eurex
Randolf Roth
Source: LinkedIn

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.

In 2019, Eurex established derivatives contracts on ESG versions of the major STOXX European benchmarks. In early 2020, global regions beyond Europe were added. Despite the COVID19-related market turbulence, volumes have increased sharply during 2020: total traded notional since launch in February 2019 in STOXX Europe 600 ESG-X futures and options has exceeded EUR 20 billion. Currently outstanding contracts are almost 100,000.

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Eurex plans to launch next generation of ESG derivatives

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