STOXX Ltd. announced that the newly launched STOXX Global ESG Impact and STOXX USA ESG Impact indices have been licensed to FlexShares, managed by Northern Trust, to underlie two exchange-traded funds (ETFs). The ETFs will be listed on NASDAQ Stock Market (NASDAQ)….
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The STOXX ESG Impact Indices are tilted towards companies that perform superior with respect to a set of selected environmental, social, and governance (ESG) key performance indicators (KPIs).
“Sustainable investing is gaining momentum as an integral part of portfolio construction. According to The Forum for Sustainable and Responsible Investment (US SIF), nearly 7 trillion US dollar are invested in ESG strategies in the US, which is up from 3,7 trillion US dollar in 2012,” said Matteo Andreetto, chief executive officer, STOXX Limited. “The STOXX ESG Impact Indices are innovative and unique index solutions that allow market participants to effectively incorporate ESG factors into their investment decisions. These indices provide a broad exposure not only to the global developed markets but also to the US market separately. Based on a carefully selected set of well-known key performance indicators, they offer targeted access to the ESG theme and reduce certain risks.”
“Sustainable investing is a dynamic area of emphasis for our clients globally,” noted Shundrawn A. Thomas, head of funds and managed accounts, Northern Trust. “Northern Trust manages over 60 billion US dollar of assets incorporating environmental, social and governance criteria. Our innovative solutions feature non-traditional index strategies and are designed to serve as strategic holdings for investment portfolios. The opportunity to collaborate with STOXX on the design of two innovative sustainable investing indices further bolsters our offering of investor-centric solutions.”
The universe for the STOXX ESG Impact Indices is the STOXX Global 1800 Index. Only the US companies are included in the STOXX USA ESG Impact Index respectively. Coal miners, violators of United Nations Global Compact principles, and companies involved with controversial weapons are excluded from the universe to reduce headline risk. For the remaining companies an aggregate ESG score is calculated, determined by the following KPIs: CDP emission/energy reduction target, percentage of women on the board, percentage of independent directors, policy against child labor and golden parachute agreement. The companies are then ranked by their aggregated ESG score and the top 50% will be included in the composition list.
The indices are weighted by free-float market cap combined with a cap factor that depends on a company’s aggregate ESG ranking in the composition list. They are calculated in price, net return and gross return versions and are available in euro and US dollar. All components are subject to a cap of 5%. The indices are reviewed quarterly. The base date is May 18, 2016, with the base value set at 1,000.