Natixis has licensed the new Solactive Climate and Energy Transition Index to be used as the basis for structured products. The index tracks the performance of companies that show the best commitment to energy transition in their sectors while showing 'low volatility and high dividend yield characteristics'. The index is based on a methodology developed by Natixis in collaboration with Sustainalytics, a provider of environmental, social, and governance (ESG) research and ratings.

Aurélien Rabaey, head of equity derivatives sales, Europe, Middle East & Africa (Emea) and global head of equity derivatives financial engineering at Natixis, said the bank remain 'strongly committed to developing innovative investment solutions for retail and institutional investors'.

'This new index provides exposure to the companies that are doing the most to reduce their climate impact and their climate risks exposure,' he said, highlighting that the index 'features allow the generation of efficient pricing when applied to structured products'.

The new index uses the Solactive GBS Developed Markets Large & Mid Cap Index as starting universe, and then screens out companies involved in the tobacco, weapons, fossil fuels and mining industries. The remaining companies are assigned a 'climate score' to reflect their level of involvement in the energy transition and climate issues.

The 'climate score', calculated by Sustainalytics, incorporates a product lifecycle approach by evaluating companies both on their carbon footprint resulting from their operations and on the indirect emissions linked to products and services during their lifecycle. The score also combines quantitative indicators to measure carbon emissions and qualitative indicators to evaluate the extent to which the company contributes to the climate and energy transition through innovative products and services. The best-ranked companies are further screened based on low volatility and high dividend yield.

"Given increased social and environmental awareness, investing in such companies can reduce the risks caused by incompliance and potentially provide a ground for future outperformance," said Timo Pfeiffer (pictured), head of research at Solactive.

"The demand and appetite for combinations of investment factors and an ESG angle is clearly increasing in the market. This is not an exclusive phenomenon in the structured products space but clearly a much broader development, for example also to be seen with new ETF launches or institutional investments. I do consider this a logic consequence while ESG in general in moving from nice-to-have to a must-have for investors."

The index is composed of forty companies listed in developed markets, is calculated as a price return index and is denominated in EUR. The weighting scheme combines low volatility and high dividend yield features.

Natixis has boosted its structured products ESG footprint recently with a number of transactions including the launch in March of the OAT 2039 Green Repack, a repackaging of the first green OAT (Treasury notes with annual coupons) issued by Agence France Treso. The French bank has also deployed several ESG indices within its retail offering including the Euronext Climate Orientation Priority 50 Ewer, Euronext Climate Orientation Priority 50 Equal Weight Excess Return Index, Euro iStoxx 70 Equal Weight Decrement 5% Index, as well as to its own proprietary strategy NXS Climate Optimum Prospective index. The latter also underlies a 12-year structured green bond launched by the World Bank in 2016.

To date, "for sure", the area of carbon emissions and climate is the main area linked to investment strategies but there are other trends to include all areas of E, S and G, according top Pfeiffer. "The G-part - governance - has currently most momentum on the back of various mis-behaviors at a corporate level," said Pfeiffer.

Related stories:
Natixis debuts 'very first' green index-linked OATS on the French market

Natixis reports 21% increase in net income, structured products boosted by high sales in France

Natixis activates 'green and sustainable' hub

Natixis specialist investment manager launches credit play