STOXX Limited, a leading provider of innovative, tradable and global index concepts, today licensed the iSTOXX Europe ESG Select 30 Index to JP Morgan for a structured product. The index screens European companies from the STOXX Global ESG Leaders Index for those that pay high dividends and also have low volatility, thus creating a hybrid portfolio of ESG, high dividend and low volatility strategies.
The index is designed to act as an underlying for exchange-traded funds and other investable products, such as structured products.
“Research shows the existence of a so-called low volatility anomaly where low volatility stocks have historically produced higher risk-adjusted returns compare to higher volatility stocks globally,” said Hartmut Graf, chief executive officer, STOXX Limited. “In addition, the historical performance of dividend indices can be significantly enhanced when adding screens for low volatility components. In our new iSTOXX Europe ESG Select 30 Index, we combine the outcome of this research with a screen for ESG, creating a hybrid index concept for ESG conscious market participants, who are also looking for high dividend payments and low volatility.”
Arnaud Jobert, managing director, head of Structuring at JP Morgan, said: “The iSTOXX Europe ESG Select 30 Index is extremely useful in creating a cost efficient structured product for investors interested in ESG strategy. Stocks from the ESG universe generally display relatively low volatility and pay stable dividends. The ESG filters are mainly non-financial qualitative criteria which can be balanced efficiently with two financial quantitative gauges - selecting low volatility and high dividend paying stocks.”
The iSTOXX Europe ESG Select 30 Index is derived from the STOXX Global ESG Leaders Index, a fully transparent equity index with components selected based on a comprehensive set of sustainability ratings.
European companies in the STOXX Global ESG Leaders Index are ranked in ascending order by their volatility. Simultaneously, they are also ranked in descending order by gross dividend yield. An average rank is calculated out of those two, and companies are then sorted by this average rank. In the case that two companies end up with the same rank, the one with the lowest volatility will be assigned the better rank. Out of the final list, the top 30 companies are selected for inclusion in the index.
The iSTOXX Europe ESG Select 30 Index is weighted by free-float market cap, with a single component’s weight cap of 10 percent. The index is reviewed annually in September after the review of the underlying index, and rebalanced quarterly in March, June, September and December.
The iSTOXX Europe ESG Select 30 Index is calculated in price, net and gross return versions and is available in EUR, GBP and USD. Daily historical data is available from Sep. 20, 2004.
For more information : stoxx.com
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