STOXX launches sustainable smart beta indices

May 26th, 2016 | By | Category: ETF and Index News

Deutsche Boerse’s index business STOXX, has launched a range of smart beta ethical indices adding to its STOXX Select and STOXX Diversification Select index family, released last year. The indices are launched as liquid underlyings for financial products such as exchange traded funds.

Matteo Andreetto, chief executive officer, Stoxx

Matteo Andreetto, chief executive officer, STOXX.

The newly launched indices combine investment themes including low carbon and ESG (economic, social & governance) with low volatility, high dividend and low correlation screens, creating hybrid index concepts.

An increasing number of investors are now incorporating sustainable/ethical investing in their portfolios. Low carbon strategies have been particularly popular as they help decrease risk over the long term. Carbon intensive industries such as oil and gas exploration can be risky (e.g. the deepwater horizon oil disaster which saw BP’s share price plummet by 52% between 20 April and 9 June 2010) and are also likely to be hit by new regulations, which could impact profit margins.

The first smart beta low carbon indices were launched in February by index provider Solactive. 

Matteo Andreetto, chief executive officer at STOXX, said in a statement:  “By extending our suite of smart-beta indices, we are again at the forefront of innovation with regard to major investment trends. For the first time, STOXX now offers Low Carbon-themed indices that are optimized for structured products as well as additional ESG indices. Thereby they are an important extension of our sustainable index offering, which includes several other indices such as the STOXX Global Climate Change Leaders Index or the STOXX Global ESG Leaders Index.”

The STOXX Select and STOXX Diversification Select Indices are derived from STOXX benchmarks, measure the performance of companies with low volatility, high dividend yield, and – in case of the STOXX Diversification Select Indices – low correlations. Index components are price-weighted with a weighting factor based on the inverse of their volatility. The additional indices of the STOXX Select and STOXX Diversification Select index family are calculated in price, net and gross return versions and are available in euro, US dollar and Swedish krona.

Investors can get low carbon exposure via ETFs in Europe with Amundi’s Low Carbon UCITS ETF (LWCU). The ETF trades on the London Stock Exchange and has seen its price rise 8% in the last three months to 209.05. It has a ongoing fee of 0.25%.

Also on offer from BNP Paribas’ ETF arm – EasyETF – is the EasyETF Low Carbon 100 Europe (ECN). It is listed on Euronext Paris and costs 0.60%.

In addition to these new indices, STOXX has launched the STOXX Global Basket Select and STOXX Global Basket Diversification Select Indices that aim to add an extra layer of diversification by investing a fixed proportion into regional STOXX Select and STOXX Diversification Select Indices (North America, Asia/Pacific and Europe). The indices are calculated in price, net and gross return and are available in euro.

 

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