Solactive AG has licensed its new Ethical US Equity Index, designed to follow US-listed ethical stocks selected according to a best-in-class approach, to BNP Paribas which said it is planning to use it to expand its range of sustainable structured investment solutions.
The Ethical US Equity Index is the second index launched by Solactive, following the Ethical Europe Equity Index in April 2013, also licensed to BNP Paribas. As reported, BNP Paribas launched in September the first World Bank green bond linked to an equity index, the Ethical Europe Equity Index. The product was designed by the capital markets teams of BNP Paribas in collaboration with the World Bank, and the first €50m 10-year issue was purchased by BNP Paribas Cardif, the group's insurance division.
"The Ethical US Equity Index tracks the price movements of stocks that have a high dividend, relatively low historical volatility and, above all, that pass several strict corporate social responsibility screens," said Steffen Scheuble, chief executive at Solactive. "By doing so, the index combines standard financial objectives together with the investors' rising demand for social, environmental and ethical tools."
According to BNP Paribas the demand for structured products associated with the first index exceeded expectations over the last year with the bank raising more than €750m from structured products based on the Ethical Europe Equity Index this year. SRP data shows that the French bank has marketed 25 structures aimed at retail investors linked to the Ethical Europe Equity index in France and Belgium.
"Sustainable investments have cemented their place in capital markets while investors are increasingly incorporating ethical considerations into their investment choices, leading to a growing interest in sustainable products," said Neven Graillat, European head of sustainable investment client solutions at BNP Paribas. "Therefore, this second index solution was a natural extension of the product range, giving access to our clients to a basket of US ethical stocks."
Environmental, social and governance rating agency Vigeo provides the starting index universe based on stocks score compared with the global average and sector peer scores. Companies with more than 5% of sales from weapons, gambling, tobacco and nuclear are removed from the universe.
To be included in the index, components also need to be incorporated and listed in the US, have an average daily trading volume of at least $50m over the last 20 trading days and a dividend yield of at least 115 % of the average dividend yield. Solactive then selects companies within the universe, filtering stocks based on their volatility compared with sector peers.
The final index components are the 30 highest ranked companies chosen following an ethical selection certified by Forum Ethibel, an independent Belgian audit institute, which verifies the strict respect of defined ethical principles.
The Ethical US Equity Index is price return and published in USD. It is rebalanced on a quarterly basis.