Natixis has launched its first dedicated climate index targeted at investors wishing to make a tangible commitment to energy transition by investing in a basket of European companies actively engaged in reducing their greenhouse gas emissions and developing low-carbon solutions.
The NXS Climate Optimum Prospective index, a new composite smart beta strategy of low-carbon stocks designed to be used as the underlying of index-linked products, responds to numerous COP 21 issues and particularly the restriction of greenhouse gas emissions and the transition toward low-carbon economic models, according to Frederic Goasguen (pictured), head of proprietary indices and algorithmic strategies, equity derivatives structuring at Natixis.
"The regulatory pressure is likely to increase in the future [and] these factors [will] encourage our clients to develop their own climate strategies," said Goasguen. "Natixis offers them dedicated investment solutions through NXS Climate Optimum Prospective index linked products. The index also includes an optimized risk framework, through the minimisation of the variance of the portfolio, aiming to outperform benchmark indices."
From a methodological perspective, the index is "deliberately and solely" focused on the issue of climate in order to enhance readability for investors, said Goasguen. It selects the 50 European companies rated the highest for their carbon performance (at a given point in time, thus making the selection dynamic) and for their ability to offer strategies, products and services compatible with a low-carbon economy. The index is constructed to deliberately diversify exposure across all economic sectors, including the most carbon-intensive where the potential to reduce greenhouse gas emissions in absolute terms is the greatest. The portfolio's carbon footprint is currently 50% lower than the Stoxx Europe 600 which has been used in 28 structures across jurisdictions.
According to Goasguen, the launch of the NXS Climate Optimum Prospective index represents the latest development from Natixis in its global commitment to play a highly active role in financing energy transition and fighting global warming as well as providing new investments and renewable energy financing.
"Climate is a challenge in terms of fiduciary duty and good stewardship, i.e to manage the risks related to climate and to identify winning investment opportunities," said Goasguen. "The COP 21 agreement reached in Paris will be an historical milestone in the fight against climate change (...) [and] the role of the financial sector will be key. The challenge is twofold: provide financial products and solutions to fund energy transition and enable capital reallocation towards low-carbon assets. Through its NXS Climate Optimum Prospective Index, Natixis is taking a step in this direction [with] a dedicated investment solution."
Natixis is "highly active" in energy transition finance, with "prime positions" in a number of areas such as renewables energy finance and the green bond markets, and the support and leverage of a "well-reputed sell-side SRI research team" within the bank's global markets division, said Goasguen.
The underlying climate methodology has been developed by Natixis' SRI Research team in collaboration with Grizzly Responsible Investment, and it is based on carbon data and a selection of qualitative scores furnished by Sustainalytics.
Natixis has marketed 280 structured products across jurisdictions of which 126 are live products.
Related stories:
AMF updates SRI policy, warns of CPPI strategies
Natixis targets 'long-only' and 'yield seeking' investors in the US