Eurex launches next generation of ESG derivatives

Randolf Roth, Member of the Eurex Executive Board.

Eurex is launching five new futures on 31 May of its next generation of ESG derivatives on the MSCI ESG Enhanced Focus Indexes.

The underlyings are the ESG Enhanced Focus versions of the benchmark indexes MSCI World, US, Emerging Markets (EM), Europe, and Japan.

These MSCI ESG Enhanced Focus Indexes aim to increase exposure to companies with a stronger ESG profile.

They also try to reduce their exposure to carbon dioxide and other greenhouse gases, as well as to potential emissions risk of fossil fuel reserves by 30%.

They employ an integrated optimisation process to ensure that a targeted tracking error to the parent index is not exceeded.

“The MSCI ESG Enhanced Focus Indexes seek to maximise their ESG profile and reduce carbon exposure while maintaining risk and return characteristics similar to the underlying parent index,” said George Harrington, Global Head of Listed Derivatives, OTC and Structured Products at MSCI. “The launch of these futures significantly grows the ecosystem that uses the MSCI ESG Enhanced Focus suite.”

Jason Warr, EMEA Head of EII Markets at BlackRock.

Jason Warr, EMEA Head of EII Markets at BlackRock added, “As sustainability becomes the new standard for investing, the launch of Eurex Futures on the MSCI ESG Enhanced Focus Index range is another critical milestone in the development of the ETF trading ecosystem. This launch will help deepen market liquidity and provide investors with access to new sustainable indexing strategies.”

Randolf Roth, Member of the Eurex Executive Board, also believed that “More advanced methods to select ESG investments are driving us to the next phase of ESG derivatives. We are already seeing this in the increasing demand for more sophisticated ESG index models in the ETF markets and hear similar requests from other active investment managers.”

The new contracts add to the second generation of ESG derivatives that are linked to indexes that integrate ESG ratings as part of the constituent selection and weighting process.

Last March, Eurex introduced futures on MSCI ESG Screened Indexes covering US, World, EM, EAFE, and Japan.

These indexes exclude companies not in compliance with the United Nations Global Compact principles or predefined ESG screening criteria.

With 136 MSCI futures and 22 MSCI options covering emerging and developed markets, Eurex said it has the most comprehensive suite of global MSCI derivatives available across all time zones.

Measured in outstanding contracts Eurex holds a global market share of over 52% with outstanding contracts currently totalling almost €129 bn.

©Markets Media Europe 2021

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