STOXX Limited introduced the EURO iSTOXX 50 SD-KPI and iSTOXX Europe 50 SD-KPI indices, which apply a sustainability focused weighting to…
Europe’s leading blue-chip indices. The SD-KPI Standards, on which the weightings are based, have been developed by Dr Axel Hesse in cooperation with global investors and analysts and the German Federal Ministry for the Environment, Nature Conservation and Nuclear Safety. The new indices are designed to act both as an underlying to passive institutional mandates, exchange-traded funds and other investable products, and as a proper benchmark for actively managed funds.
“With the launch of the EURO iSTOXX 50 SD-KPI and iSTOXX Europe 50 SD-KPI indices, we are offering market participants a tool to invest in a sustainability optimized version of the leading European blue-chip indices,” said Hartmut Graf, chief executive officer, STOXX Limited. “The new indices combine the best of two worlds for sustainability conscious market participants, while combining the sophisticated SD-KPI Standards with STOXX’s flagship products.”
“Institutional investors have a fiduciary duty to consider material environmental, social and governance (ESG) indicators that are relevant for the financial performance,” said Dr Axel Hesse, managing director of SD-M GmbH, which provides STOXX with the SD-KPI values. “The integration of sustainable development key performance indicators (SD-KPIs) 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.”
The EURO iSTOXX 50 SD-KPI and iSTOXX Europe 50 SD-KPI indices are based on the EURO STOXX 50 and STOXX Europe 50 indices, respectively. While the composition of the new indices remains identical to the base index, the components are over- and underweighted according to their SD-KPIs in the SD-KPI Standards. For each sector in the index, three SD-KPIs are identified as being most relevant for the expected business development and performance of companies allocated to this sector. All companies in the index are then evaluated by these SD-KPIs and a total score is calculated for each company. This score is the basis for each company’s new weight in the index: All scores are put into five brackets, and every bracket provides 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.
The EURO iSTOXX 50 SD-KPI and iSTOXX Europe 50 SD-KPI indices are reviewed annually in August, and rebalanced quarterly. The new indices are available in price, net and gross return versions, and calculated in US dollar and Euro. Daily index data is available back to September 24, 2007.
Source: ETFWorld – STOXX Limited
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