In this paper, we have narrowed our focus and analyzed the performance of the DAX® 50 ESG Index over the period from March 20, 2020 (the end date of our analysis last time and which was around the beginning of the recovery from the market distress caused by the COVID-19 pandemic) until November 13, 2020. Our findings show that the DAX® 50 ESG Index has outperformed during this period, with the sustainability criteria applied as part of the index methodology contributing favorably to returns.
The STOXX® Global 1800 Index surged 12.9% in dollars in November, its largest monthly increase since data begins in 2004, as three drugs manufacturers announced their experimental vaccines are widely effective in preventing the COVID-19 virus.
In this paper, we evaluate the EURO STOXX 50® ESG Index’s liquidity and tradability characteristics compared to its benchmark, and make an estimation of execution cost of switching from the benchmark to the index. We believe this analysis would be of interest to market participants given the recent launch of derivatives on the EURO STOXX 50® ESG Index, and to those with exposure to the EURO STOXX 50® that may be seeking a more sustainable flagship alternative.
The DAX® 50 ESG Index is the flagship index for sustainable equity investments in Germany and the most recent addition to the DAX® index offerings. The DAX® 50 ESG tracks the performance of a diversified portfolio of 50 largest, most liquid eligible German market stocks screened for Global Standards Screening, involvement in controversial weapons, tobacco, thermal coal, nuclear power and military contracting.
Following on from the successful derivatives launches in 2019, STOXX Ltd. (now part of Qontigo) has recently licensed the STOXX® USA 500 ESG-X Index as an underlying for listed futures on Eurex. These are the first derivatives covering the US market to include screening for thermal coal mining and coal-fired power plants. The new futures have been available since February 10, 2020, expanding the ESG derivatives product suite to a global level.
STOXX is synonymous with equity indexing in Europe. The EURO STOXX 50® Index, EURO STOXX® Index and STOXX® Europe 600 Index have for over 20 years provided liquid and effective access to the region’s stock market, based on transparent rules and an objective methodology.
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 term “megatrend” was coined by US political scientist and author John Naisbitt at the start of the 1980s. It refers to powerful macroeconomic transformative forces that have a major impact on countries, businesses and societies around the world, disrupting the way products and services are produced, delivered and consumed.
Minimum variance strategies have gained significant traction especially since the global financial crisis. They aim at reducing or minimizing variance, i.e. the square of volatility as measured by standard deviation, or, in this case, price fluctuations of portfolio prices around their mean.