Eurex Hails Success of ESG Futures
Eurex said environmental social and government futures have reached 235,000 traded contracts and peaked at €782m ($871m) in open interest since launching six months ago.
Michael Peters, deputy chief executive of Eurex, said in a blog that the derivatives exchange owned by Deutsche Börse has received positive feedback from institutional clients as well as banks and sees liquidity provided by market makers steadily improving.
Eurex launched three futures covering STOXX Europe 600 ESG Exclusions, EURO STOXX 50 Low Carbon and STOXX Europe Climate Impact on 18 February.
“Positions have been shifted from the existing benchmark to the more sustainable alternatives especially in June, the last roll month,” he added.
Peter continued that current demand comes from ESG strategies related to exclusions so the contract that is likely to be most popular is the STOXX Europe 600 ESG, which is based on the STOXX Europe 600 index but with standardized ESG exclusion screens applied.
Climate derivatives cover an important theme but are still niche for assets under management according to Peters.
“However, the European Union is very committed to ambitious climate and energy targets for 2030 in line with the UN 2030 Agenda, the SDG (Sustainable Development Goals) and the Paris Agreement,” he added. “This long-term strategy will also increase the need for Eurex Low Carbon and Climate Impact futures.”
Eurex is working on expanding ESG futures to cover more regions and to offer options.
“Moreover, we have started to consult with investors on their need for more advanced ESG index concepts, for example, an ESG “Best in Class” futures contract,” said Peters.
In June Vassilis Vergotis, head of equity & index strategy and product design at Eurex, said the derivatives exchange hoped to expand its range of ESG futures this year.
Vergotis said: “This year we hope to expand our segment further with products that cover additional ESG strategies and address the needs for ESG benchmarks outside Europe”
STOXX, the operator of Deutsche Börse Group’s index business, has this month has launched an ESG version of its flagship index Euro STOXX 50. The index was licensed to UBS Asset Management as an underlying for an exchange-traded fund, which was listed in Frankfurt.
Clemens Reuter, head of ETF & passive investment specialists at UBS Asset Management, said in a statement: “The demand for sustainable investments is accelerating, and the EURO STOXX 50 ESG helps us expand into new markets and segments, widening ESG investment opportunities.”
Willem Keogh, STOXX head of ESG, thematic and factor solutions said in a statement that the ESG-version of the blue-chip index is a highly liquid solution for asset owners who are looking for cost-effective ways to integrate sustainable factors in the core of their investments.
“The new index is suitable for mandates for pension funds, insurance companies, ETFs, passive funds, and structured products,” he said.
SOFR average daily volume increased over 250% from a year ago.
Trading conventions for USD leg of new cross-currency derivatives will switch on December 13.
The contract offers the market a way to access and hedge a global price for carbon.
The exchange launched on March 29 this year.
The exchange has started trading seven new FX futures on Scandinavian currencies.