Blog Posts — October 30, 2019

New Index Tracks Ocean Care Champions

The planet’s water bodies are the destination for an important share of human waste and pollution. Rubbish, factory refuse, septic tanks, car fumes, pesticides – they all eventually flow into rivers, seas and oceans. 

New findingsfrom the World Bank now show that worse-than-thought degradation and contamination have turned our waters into vast pools of hidden dangers. Water pollution is directly affecting lives, while hampering economic growth and social development. 

The severity of this problem is augmented by the circular effect between deteriorating marine water quality and climate change, with both feeding each other. Last month, the Intergovernmental Panel on Climate Change (IPCC) warned of the dramatic effects that rising sea levels and ice melting due to higher temperatures and carbon emissions are having on climate, ecosystems, species and lands.2  

The causes of this urgent crisis, including industrialization and intensification of agriculture, are only accelerating.

New index tracks best sustainable water and climate practices

To help investors address water sustainability concerns, STOXX is introducing the EURO iSTOXX® Ocean Care 40 Index. The index targets European companies that are taking initiatives and implementing strong programs towards efficient water management. 

The core criteria for admission into the index is an Ocean Care rating, an average of 13 key performance indicators provided by STOXX’s partner Sustainalytics that aim to assess companies’ efforts to protect waters and the environment. They are:

  • Environmental policy (assessment of the company’s commitment to protect the environment) 
  • Environmental management system
  • Biodiversity programs 
  • Oil spill disclosure and performance
  • Water intensity (assessment of the company’s external cost of water-related impacts)
  • Hazardous waste management
  • Water management programs (programs to reduce fresh-water use)
  • Environmental fines and penalties (analysis of environmental sanctions received by the company) 
  • Carbon intensity 
  • Operations-related controversies or incidents (controversy indicator includes emissions, waste, and energy, land, biodiversity and water use) 
  • Contractors and supply chain-related controversies or incidents 
  • Products and services-related controversies (environmental and carbon impact of products)
  • Supplier environmental programs (assessing companies’ programs to improve the environmental performance of suppliers)

Constituents in the EURO STOXX® Index, the parent index universe, are first screened for a minimum trading volume threshold. Stocks that clear this filter are ranked in descending order by their market capitalization multiplied by their Ocean Care rating. This product also sets each stock’s weight in the index. 

The two top-ranked companies from each one of the 19 ICBSupersectors are selected into the index, ensuring sector diversification. To reach a constituency of 40, the selection is completed with the two highest-ranked companies not yet included, each from a different Supersector.

The EURO iSTOXX Ocean Care 40 Index is part of the growing STOXX® Thematic Indices

Passive approach to tackle serious problem

The effects of the water quality crisis threatening our world could be devastating. One positive point is that awareness is on the rise, and many countries are encouragingly enacting legislation and regulation to stem water pollution. More information, prevention and investments will also help solve the problem, according to the World Bank report. 

Investors and businesses are also stepping up their responsible duty in managing our rivers and seas. This latest index aims to connect both actors to conduct change for this indispensable natural resource.

Featured indices 

EURO iSTOXX® Ocean Care 40 Index   

The World Bank, ‘Quality Unknown: The Invisible Water Crisis,’ Aug. 20, 2019. 
‘IPCC Special Report on the Ocean and Cryosphere in a Changing Climate,’ September 2019.  
Industry Classification Benchmark.