Following the worldwide trend towards responsible investing, Europe’s largest futures and options market has expanded its ESG segment to markets outside of Europe in a move to support asset managers in their switch to sustainable investing. As of March 2, five new Eurex futures will cover sustainable versions of key regional and global MSCI benchmarks.
Trading in MSCI index-based derivatives is one of the fastest growing segments at Eurex. The share of client business driven by institutional investors has nearly doubled within the last two years and now represents 27% of turnover. Eurex’s MSCI index-based derivatives offering is the broadest worldwide to be tradable on a single platform, with 120 MSCI index-based futures and 20 MSCI index-based options currently listed. Total open interest is approximately 2.5 million contracts, which is the world’s highest MSCI index-based derivative-related open interest.
The new contracts complement Eurex’s previous ESG offering, which mainly focused on European markets, and include ESG-screened versions of MSCI indexes covering the US, emerging markets, developed markets outside the US and Canada (EAFE), Japan and the world. “Our aim is to set the agenda in ESG and to offer investors the greatest possible flexibility in their global ESG investments,” says Michael Peters, Member of the Eurex Executive Board.
Carolyn Weinberg, Global Head of Products for ETF and Index Investments at BlackRock, adds: “The new Eurex ESG futures reflect the growing demand for sustainable benchmarks on a global scale. The transparency of sustainable indexing methodologies empowers financial markets participants to articulate their risk preferences. The extension into derivatives is significant as sustainable indices are used as financial instruments.”
The underlying MSCI ESG Screened Indexes follow a negative ESG screening or exclusions methodology, which reflect investors’ most common concerns. Exclusions aim to help avoid stocks that carry reputational risk and are considered controversial. This filters out components from a standard MSCI benchmark – such as controversial weapons companies, tobacco manufacturers or companies deriving revenues from thermal coal, as well as companies not complying with UN Global Compact Principles.
The move follows the launch last month of additional ESG futures with the STOXX Europe 600 ESG-X Index Futures (FSEG), taking the number of ESG derivatives listed on the exchange to over 700,000 contracts with a notional value of over €10 billion traded.