Eurex to launch next generation of ESG derivatives

• New ESG futures and options on DAX 50 ESG and EURO STOXX 50 ESG Indices
• A step forward from ESG screening to an integration methodology

The international derivatives exchange Eurex is supporting the strong global trend towards responsible investing by expanding its ESG segment. With futures and options on the EURO STOXX 50 ESG Index, Eurex will add another European benchmark to its offering. In addition, derivatives on the DAX 50 ESG Index will cover the German market for the first time. The new contracts will be launched on 9 November.

ESG derivatives are playing an important 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. And with these new contracts, Eurex is going one step further in terms of methodology. For the first time, these derivatives will be based on indexes incorporating ESG scores. This means, in combination with screening out undesirable securities, ESG rankings are also considered as part of the selection process.

Companies in the DAX 50 ESG Index must pass standardized ESG screens related 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 which comprises the joint set of companies included in the DAX, MDAX and TecDAX.

The EURO STOXX 50 ESG Index is based on Europe’s flagship benchmark, the EURO STOXX 50 Index. The ESG version excludes companies that Sustainalytics considers to be non-compliant with Global Standards Screening. In addition to the exclusion screens, the ten per cent 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.  

“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,” said Rodolphe Bocquet, Global Head of Sustainable Investment at Qontigo.

Inflows into sustainable funds have multiplied during recent years. Randolf Roth, Member of the Executive Board of Eurex: “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 was the first exchange to establish derivatives contracts on ESG versions of the major STOXX European benchmarks. In early 2020, this was complemented by global regions beyond Europe. Despite the COVID19-related market turbulence, volumes have risen sharply this year: total traded notional since launch in February 2019 in STOXX Europe 600 ESG-X futures and options has already exceeded EUR 20 billion. Currently outstanding contracts amount to almost 100,000.