EURO STOXX 50® ESG – Integrating Sustainability
Sep. 30, 2019
Speaker : Ladi Williams, Product Manager and Anand Venkataraman, CFA, Head of Product Management
Sep. 30, 2019 Speaker : Ladi Williams, Product Manager and Anand Venkataraman, CFA, Head of Product Management
Earlier this year, STOXX introduced the EURO STOXX 50® ESG Index, a ESG version of the iconic EURO STOXX 50® that follows standard responsible investment exclusions and integrates companies’ ESG scores into stock selection.
The combination of ESG exclusions and integration into one systematic methodology is a step further from the existing exclusion-based responsible-investing benchmarks such as the EURO STOXX 50® ESG-X Index.
A STOXX research paper now puts the EURO STOXX 50 ESG Index under the microscope to analyze its profile and characteristics, and the effect of implementing the strategy.
The study uncovers some interesting findings. Among them:
• The EURO STOXX 50 ESG maintains a similar composition to its benchmark yet increases its ESG score.
• Both the replacement of excluded securities and subsequent weighting redistributions have added to the portfolio’s overall ESG score.
• ESG integration over the full observation period has added to returns while negative exclusions have been a drag.
This research study may prove to be a helpful guide for the growing number of investment managers looking beyond negative ESG screening strategies and into more comprehensive sustainable approaches that can also enhance a benchmark’s risk-return profile.
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