FEATURE | Q&A
Euronext: almost impossible to meet all EU, national requirements Euronext made the headlines on this year’s SRP Europe Awards after a structure sold in France by Hedios and issued by Société Générale linked to the Euronext Eurozone 40 EW Decrement 5% Index delivered 144% in its first observation date.
T
he French company also saw its Euronext France Social Decrement 3.75% Index being the recipient of the SRP Best Structured Products Funds Award – as the underlying of the LCL Impact Social 2021 a fund that directly invests in the components of the index sold by LCL and issued by Amundi. Fabrice Rahmouni (pictured), head of Euronext Index Business at Euronext, talks about the company’s ESG and thematic focus, index complexity, regulation and standards. “ESG indices are at the core of our strategy,” says Rahmouni, pointing that sustainability has been part of its strategy since 2008 after the launch of the first low carbon Index in 2008. “Last year, we moved forward on our plans with the decision to provide ESG alternatives of all our blue-chip Indices, responding here to the growing demand for sustainable investment tools from investors and the wider market,” he said. In March 2021, Euronext launched the CAC 40 ESG index which was the first ESG play developed by the index arm of the European exchange. The launch was successful as Amundi and BNP Paribas - two of the main ETF providers in France - decided to switch their entire exposures on the CAC 40 to the ESG version. In October 2021, the exchange expanded its ESG offering to other blue-chip indices with the launch of the MIB ESG index – this index and the
38
www.structuredretailproducts.com
CAC 40 ESG version were developed in partnership with Moody’s after a consultation with the market. In January 2022, Euronext partnered with Sustainalytics to launch the AEX ESG and OBX ESG indices in the Netherlands and Norway, but the company is looking to leverage its offering further with climate alternatives. “We plan to deploy climate alternatives of all our blue-chip indices, starting with the CAC 40 by providing a CAC 40 Climate index in the coming months and then expand the offering to other indices,” said Rahmouni. “This is the visible part but on a day-today basis ESG is coming up on every conversation – almost 80% of the requests we get are for customised indices include ESG considerations. Among them, we have developed a wide range of indices which are aligned with EU Climate Benchmark regulation, providing EU ParisAligned Benchmarks [PAB].” According to Rahmouni, this increasing demand is being driven by the different EU and local regulations and labels framing the ESG space which is line with Euronext’s “ambition is to proactively contribute to the construction of a sustainable financial ecosystem”. GREEN FOCUS Despite the evolution of ESG as an investment theme over the last few years most of the demand continues to be on the environment/climate side although new underlyings and programmes are being developed to support social goals causes as well.
As a concrete example, Rahmouni points at the LCL Impact Social 2021 product which received the SRP Best Structured Products Funds Award this year - the fund directly invests in the components of the Euronext France Social Decrement 3.75% Index. “This is a leading benchmark with a focus on social risks in France,” he said. “This is an example of underlyings with a social component are entering the market.” On the environmental side, new underlyings are being developed as clients are focusing on specific themes such as biodiversity. “We have developed biodiversity indices for a couple of clients which are working quite well,” said Rahmouni. “On top of that, we also see increasing demand for indices aligned with EU Climate benchmarks (such as PAB, CTB indices). “Currently, we are working on a Biodiversity PAB index. These concrete examples suggest that as the E part gets improved, it becomes more valuable, and we think it will happen with new indices with a social component too.” On the governance side, there is no concrete pure index play today despite being one of the drivers of the shift towards ESG. “Six years ago, when we decided to accelerate our strategy in terms of ESG index development, our first conviction was that governance would be the top priority to work on because it's a topic that asset managers know well,” said Rahmouni. “However, developments on the G of ESG remain limited.”
