Goldman Sachs has executed the first trade on the CME’s new E-mini S&P Europe 350 ESG Index futures, according to the derivative exchange.
The trade, completed as a block trade in the minimum block size of 50 lots, is valued at €4 m notional.
Based on S&P’s detailed ESG assessment methodology, the product aligns with the upcoming (Article 8) requirements of the EU’s sustainable finance disclosure regulation (SFDR), enabling investors with European equity exposure to manage risk while incorporating sustainability targets in their strategies.
The SFDR requires asset managers for the first time to provide information about their investments’ environment, social and governance (ESG) risks as well as impact on society and the planet.
Funds have been classified into one of three categories, Article 6, 8, or 9, based on the sustainability objective although the latter two will have to provide more detailed ESG disclosure.
Article 9 covers funds that specifically have sustainable goals as their objective such as investing in companies that aim to reduce carbon emissions while Article 8 includes funds that promote E or S components but do not have them as the broad objective.
“Goldman Sachs is pleased to have facilitated the first block trade in E-mini S&P Europe 350 ESG Futures,” says Antony Harden, Executive Director, Goldman Sachs. “The development of liquid derivatives is crucial for market participants as they look to manage their ESG portfolios.”
“The first trade represents an important step in the development of another one of our sustainable investment products, including the liquid E-mini S&P 500 ESG futures,” says Tim McCourt, global head of equity index and alternative products at CME Group.
He adds, “As demand for sustainable investments continues to grow globally, our goal is to grow the liquidity of these products and provide participants with a wider range of risk management tools which are crucial for the development of sustainable markets.”
CME Group launched futures contracts in the E-mini S&P Europe 350 ESG Index in May as a targeted risk management tool to align with environmental, social and governance (ESG) values.
The S&P Europe 350 ESG Index is a broad-based, market-cap weighted index that is designed to measure the performance of securities meeting sustainability criteria, while maintaining similar overall industry group weights as the S&P Europe 350.
This index incorporates S&P DJI ESG Scoring, which leverages industry assessment data from, S&P Global ESG Research, in order to identify companies that are better equipped to recognise and respond to emerging sustainability opportunities and challenges.
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