Belgian insurer partners with Goldman, tracks ESG

Benchmark

Ethias has returned to the Belgian market after an absence of 13 years.

as an EU benchmark, is based on the MSCI Europe, its parent index. It aims to support investors seeking to reduce their exposure to transition and physical climate risks and who wish to pursue opportunities arising from the transition to a lower carbon economy while aligning with the Paris Agreement requirement.

“It is an index with a story, a scientific story of decarbonisation in line with the Paris Agreement,” said Alain Flas (pictured), senior investment manager sustainable investing and fund selection, Ethias.

related to one or more investment themes and are determined by algorithms with complex mathematical calculations based on volatility and dividends, significantly increase the risk that investors not (fully) understand these structures.

“That’s why I wanted an index which is considered by the EU as a benchmark,” said Flas, who asked Goldman Sachs International not to use a proprietary index made by the investment bank for this product but use an external benchmark index instead.

Ethias has launched Ethias Invest, issue 01/2023 in Belgium. The 8.1-year lifeinsurance (Class 23) is linked to an internal structured investment fund, which invests fully in an EMTN issued by Goldman Sachs International. It participates 100% in the rise of the MSCI Europe Climate Paris Aligned Price EUR Index, capped at 59% and subject to 24-months backend averaging.

The minimum capital return is 102% and the product classifies as a financial product according to Article 8 of the sustainable finance disclosure regulation (SFDR). It is Ethias’ first structured offering since July 2010 when it launched Lift Security 07/2010.

The underlying MSCI Europe Climate Paris Aligned Price EUR Index, which qualifies

The index is built to target a reduction of at least 50% in greenhouse gas (GHG) intensity (Scopes 1, 2 and 3) and potential emissions.

“It is designed to reduce its GHG intensity by 10% every year; achieved through re-weighting and selection of companies during rebalancing,” said Flas.

The product is the first linked to an equity index in Belgium since June 2022, when the FSMA sent a letter to distributors of structured products in which it recommended not to use proprietary or house indices that are optimising the potential payoff for the end client.

“With the exception maybe of some products on the Eurostoxx 50,” said Flas.

According to the regulator, custommade house indices, which are often

Despite wanting an index with a story, Flas admits he might not be able to use this story for the E or S characteristics in the product.

“That story may well not be applicable if the index has not provided a positive performance at the end of the investment term.

“The E or S characteristics of the product, we find them in the sustainability bond framework from Goldman Sachs. I wanted to have an issuer issuing the EMTN under the very strict green, social or sustainability bond framework by ICMA, the International Capital Market Association.

“Any normal plain vanilla type of issue would not pass this test. I refused a few proposals that we received because I wanted this product to qualify for SFDR 8 –that's the story,” Flas concluded.