Environmental, social and governance

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Environmental, social and governance, or ESG, is a term used to describe an investing strategy, or screening process, that incorporates factors pertaining to sustainability, social responsibility and corporate management.[1]

The term originates from a 2004 United Nations publication called "Who Cares Wins." [2] In its early days, it mostly meant avoiding companies like those engaged in the production and/or sale of tobacco, alcohol or firearms, but has since grown to encompass companies that include, promote and/or focus on issues like workplace diversity and low emissions. ESG builds upon an preexisting trend of socially responsible investing, or SRI.[3][4]

Exchange Trade ESG Products

In the listed derivatives space, Eurex was the first exchange to establish a successful suite of ESG futures contracts, STOXX® Europe 600 ESG-X Index Futures (FSEG), EURO STOXX 50® Low Carbon Index Futures (FSLC) and STOXX® Europe Climate Impact Index Futures (FSCI). Introduced in February 2019, its ESG Index futures track a group of companies that are filtered to meet ESG criteria. The STOXX® Europe 600 ESG-X Index Futures, is based on socially responsible investment criteria. The EURO STOXX 50® Low Carbon Index Futures is based on a benchmark index which includes lower carbon emitting companies. And the STOXX® Europe Climate Impact Index Futures is based on a index of companies adhering to Climate Disclosure Project guidelines and excludes companies in tobacco and weapons manufacturing. In its first six months of trading, the ESG futures suite traded 243,000 contracts with an open interest value of EUR 786 million. Eurex announced plans to list the contracts in the US in 2019.[5]

[6][7]


References

  1. ESG Investing. MSCI.
  2. Who cares wins in the brave world of ESG. Financial Times.
  3. A Better Approach to ESG?. Barron's.
  4. The Remarkable Rise Of ESG. Forbes.
  5. EURO STOXX® 50 Low Carbon. STOXX.
  6. EURO STOXX® 50 Low Carbon. STOXX.
  7. Eurex Group sees 235,000 ESG futures traded since launch. The Trade.