Charlotte Alliot: « Index and Futures Euronext ESG 80 allow investors to invest in the 80 best performing ESG and best energy transition score listed companies in the euro zone »

Next-Finance : Why did you decide to launch a new ESG index called Euronext Eurozone ESG Large 80?

Charlotte Alliot: We launched this new index in April 2020 because we were approached by several members of our markets in order to create a benchmark with strong ESG conviction which had to satisfy several criteria: meet the needs of investors through a public index accessible to all, be focused on energy transition with a high degree of exclusion, be sufficiently liquid, be representative of the eurozone economy and therefore of the sectoral breakdown of its parent index, the Euronext Eurozone 300, and finally, no greenwashing.

Euronext had already launched a Low Carbon index a few years ago. What are the main differences? Can you explain the methodology of this new ESG 80 index?

This new low-carbon index, called Euronext ESG 80, allows investors to invest in the 80 best performing ESG listed companies in the euro zone. This is a public index, unlike the Low Carbon 100 Europe index which is exclusive to BNP Paribas for their ETF.

To build the ESG 80 index, we started with a sample comprising the 300 largest market capitalisations, before applying a filter excluding 20% of the least performing companies from a social point of view, then the 20% less competent in governance. Also excluded are companies with a critical controversy with the UNGC principles, as well as those involved in coal, tobacco or controversial weapons. Finally, the 80 stocks with the best energy transition score (scores defined by our partner Vigeo Eiris, a Moody’s subsidiary) are retained, while maintaining a sectorial representation close to the parent index.

How does the ESG 80 index differ from other benchmarks in the eurozone?

In terms of performance and volatility, there is a similarity between the ESG 80 and its benchmark, the Euronext Eurozone 300.

On the other hand, for an identical risk-return profile and according to the Vigeo Eiris method, ESG 80 improves the overall ESG score by 16.1% and the energy transition score by 26.2% compared to the EZ300. This therefore makes it a quality index that meets the expectations of investors, while allowing them to come as close as possible to high ESG scores.

On the other hand, for an identical risk-return profile and according to the Vigeo Eiris method, ESG 80 improves the overall ESG score by 16.1% and the energy transition score by 26.2% compared to the EZ300.

Charlotte Alliot, Head of Institutional Derivatives chez Euronext

For which type of financial products this index aims to serve as an underlying?

The recent marketing efforts for this new index allow us to be optimistic for its future development among investors. Its aim is to support the reallocation of assets towards a responsible index, committed to the climate transition. We are therefore currently in discussions with ETF providers, issuers of Structured Products and institutional investors. The methodology is positively received by these different actors because it combines liquidity and representativeness with strong selection criteria in terms of ESG.

What is the nature of the futures contract on this index?

We launched a futures contract on the ESG 80 index on June 1, 2020. Its liquidity is currently provided by four market makers committed to a responsible economy, present since inception: BNP Paribas, DRW, Optiver and Societe Generale. One of the main purposes of this futures contract is to greatly facilitate the reallocation of investor assets towards green and responsible financial products. Euronext considers that we have a major role to play in supporting this move and that it is our duty to facilitate this transition. Thus, the transaction costs (negotiation and clearing) on this derivative contract are the most accessible in Europe.

One of the main purposes of this futures contract is to greatly facilitate the reallocation of investor assets towards green and responsible financial products.

Charlotte Alliot, Head of Institutional Derivatives, Euronext

Do you plan to create other green indices, enriching your range which has more than 40 on this subject? If so, around which specific theme?

We have several new ESG index projects coming up. One of them is in the bond segment through green bond indices, but it is still too early to communicate on this information. We are also working on the launch of new PAB (Paris-aligned benchmark) indices focused on decarbonization, in particular for ETF issuers.

What are your ambitions in terms of responsible investment?

One of our ambitions is to establish green and public stock market indices within the euro area to serve as a benchmark for investors. We also want to develop our range of responsible bonds (both green, blue and social), ETFs and derivatives. These objectives are part of our three-year strategic plan entitled: "Let’s Growth Together 2022", comprising a key pillar focused on ESG, both in our financial products and services, but also in our internal CSR policy, our carbon footprint, relations with our customers and partners and our societal investment.

Moreover, Euronext is part of the United Nations Sustainable Stock Exchanges (SSE) initiative, whose mission is to study the means of collaboration between financial centers and investors, as well as regulators and companies with a dual objective: to improve transparency with regard to ESG issues and encourage responsible and long-term financing.