Euronext launches ESG transition index

European stock exchange advances the EU sustainability agenda with array of updates

The European stock exchange has announced a transition index as well as updates on a series of ESG products and services to advance the European sustainable growth agenda

Stéphane Boujnah, chief executive and chairman of the managing board at Euronext, said the move was part of its three-year roadmap plans Let’s Grow Together 2022, which aims to build the leading pan-European market infrastructure to accelerate innovation and sustainable growth.

Suite of changes

Introducing the Euronext ESG 80 index and derivatives 

The Euronext Eurozone ESG Large 80 tracks leaders in the Eurozone that scored best in the energy transition within each sector of the Euronext Eurozone 300 index. Excluded are companies with exposure to critical UN Global Compact controversies, 20% of companies which perform worst on social and governance scores; as well as those involved in the production of coal, tobacco or weapons. The scores are provided by Vigeo Eiris.

At the beginning of June, Euronext introduced its first futures contracts based on an ESG index.

The Euronext Eurozone ESG Large 80 Index Future is a hedging tool that allows exposure to the sustainable economy in the Eurozone.

Aligning Europe’s leading Low Carbon 100 index to the Paris Agreement

The Low Carbon 100 Europe index has been aligned with the draft of the regulation on the EU Paris-aligned Benchmark (PAB), which seeks to limit global warming according to the Paris Agreement, and will be officially adopted later this year, Euronext said.

The index is designed to reflect price level trends of companies in Europe that have the relative best climate score. Its universe is made of the 300 highest free float market capitalisations of the Euronext Europe 500 Index.

To be labeled as PAB, the index must, among other things, comply with the following criteria:

  • a 7% year-on-year carbon intensity reduction
  • a 50% carbon intensity reduction compared to the index universe
  • exclusions of certain fossil fuel-related activities, controversial weapons and societal norms’ violators
  • minimum exposure to sectors highly exposed to climate change issues

The Low Carbon 100 Europe index is used by an ESG ETF of BNPP AM.

As of May 2020, it has €789m of assets under management.

Data providers are CDP, Carbone 4 and Vigeo Eiris.

Expanding Euronext ESG bonds offering 

Euronext has also expanded its green bonds offer and included blue, social and sustainability-linked bonds.

To date, 231 ESG bonds from 95 issuers are featured as part of the established Euronext ESG bonds section.

In 2019, the stock exchange listed €54.3bn of green bonds, which represented almost one-fifth of green bonds issued globally in that year.

Two other announcement include the launch of an ESG advisory services and ESG reporting solutions for listed companies and endorsing the UN Global Compact’s Sustainable Ocean Principles.

High impact projects

Boujnah commented: “Euronext can significantly advance the European sustainability agenda through its unique role in financing the real economy [and] connecting local economies with global capital markets.

“Our ESG product strategy ensures investors can deploy their capital efficiently and transparently to support high-impact projects and companies.”

A version of this article appeared on ESG Clarity sister site Expert Investor

Natalie Kenway

Natalie is global head of ESG insight for ESG Clarity. She won Editor of the Year at the Aviva Investors Sustainability Media Awards 2021. Winner of Aegon Asset Management's Institutional Journalist of...