Backing European investors in the financing of listed entities with the greatest impact on energy transition is the main goal of the Euronext ESG Large 80 Index, composed of a group of companies selected from the portfolio of the Euronext Eurozone 300 Index, which includes the largest and most liquid listed entities in the Eurozone. “Those ranked highest in performance in relation to the transition to a low-carbon economy and reduced impact on climate” are chosen, Isabel Ucha, CEO of Euronext Lisbon, explained to Energiser.
The new index is part of Euronext's sustainability strategy, implemented under the slogan “Empower Sustainable Growth”, and the goal consists of “it being available to a significant number of fund managers and institutional investors throughout Europe, serving as an underlying mechanism for several different types of products such as ETF (Exchange Traded Funds), certificates, warrants, structured products, among others”, Isabel Ucha adds.
As far as the CEO of Euronext Lisbon is concerned, ESG Large 80 is a European benchmark and an additional factor of visibility and renown for its member companies
As a means of boosting support for investment in this index, Euronext also launched a futures contract on the ESG Large 80 in June. “This is the first derivative contract launched by Euronext on this index, part of a family that will be extended”, declares the CEO of Euronext Lisbon, who adds: “having derivative instruments on this index provides investors with the opportunity to better manage the risk of their investments, as well as being an additional instrument of exposure to sustainable investment”.
Under the eye of investors
The companies selected to join ESG80 will, from now on, be under the watchful eye of investors in general, and will benefit from increased interest in the ESG investor community. “This is an open European benchmark, meaning we expect it to be adopted by a large number of asset managers and institutional investors, in addition to serving as an underlying mechanism for a wide range of products”, says Isabel Ucha. In the opinion of the head of Euronext, it also provides additional visibility and renown for these companies and their stakeholders in general, including employees, customers, regulators and the community in general. “Of course, the company will have an even greater commitment to sustainability, given the additional scrutiny it will undergo”, she adds.
When asked about the fact that only two Portuguese companies are part of this index - Galp and Jerónimo Martins -, Isabel Ucha explains that this does not imply a poor commitment of national organisations to sustainability. Being a Eurozone benchmark, she explains, “the range of companies comprising the index must reflect the diversity of the different sectors and geography of the Eurozone within the scope of the biggest and most liquid companies in this universe".
With regard to representativeness by sector, this index is extremely diverse. It features a little of everything, from industrial goods and services to personal and household goods, technology, health, food and beverages, utilities, banking, and oil & gas. However, according to the CEO of Euronext Lisbon, “no sector accounts for more than 10% of the index, and most account for 5% or less”.
Despite the fact there are no plans to extend this index to more companies for the time being, Isabel Ucha acknowledges that the commitment of organisations to sustainability and energy transition is growing. “Companies have been internalising the urgency of dealing with these issues because they have realised that we are running out of time in the race to prevent a series of consequences that could be vital to our survival on the planet”. In her opinion, this call to action comes increasingly from European citizens, who are better informed and more aware of the issue. “Moreover, we shouldn´t forget that these citizens are simultaneously the customers, employees, investors and regulators of these companies. Only the alignment and mobilisation of all these stakeholders will ensure we achieve the goals of sustainable development, which we all aspire to”, she concludes.