STOXX launches two new sustainability indices based on its blue-chip European 50

Major benchmarks are slanted towards top-ranked ESG KPIs.

STOXX, the global index company, has launched two new indices that apply a sustainability skew to the STOXX 50 eurozone index and the STOXX Europe 50, two of the most commonly used blue-chip investment benchmarks. The company has launched the EURO iSTOXX 50 SD-KPI and iSTOXX Europe 50 SD-KPI indices, which re-weight both indices according to a set of key sustainability performance indicators (KPIs). The SD-KPI Standards have been developed by Dr Axel Hesse, Managing Director of SD-M, the sustainability research consultancy, using data provided by Sustainalytics and in co-operation with investors, analysts and the German Federal Ministry for the Environment, Nature Conservation and Nuclear Safety. STOXX said the new indices could underlie passive institutional mandates, exchange-traded funds and other investable products, and act as a sustainable benchmark for actively managed funds. The iSTOXX brand comprises index concepts that are not included in the company’s global indices family, but are also rules-based. The composition of the newindices is identical to the base index (STOXX 50, STOXX Europe 50), but the components are over- and under-weighted according to their SD-KPIs. For each sector in the index, three SD-KPIs are identified as most relevant for expected business development and performance. A total score is then calculated for each company. All the scores are then put into five brackets that provide a value for over- or under-weighting from -10% to 10%. This quintile is added to or subtracted from the company’s original weight in the base index to make up the weight in the new index. Hesse said: “The integration of sustainable development key performance indicators should also achieve two more goals: a low tracking error to the EURO STOXX 50 or STOXX Europe 50, with the opportunity to use the conventional options and futures for hedging, and a more sustainable investment.”
STOXX already runs its ESG Leaders indices, a set of best-in-class sustainability benchmarks.