Solactive oekom Ethical Low Volatility Index launched as BNP Paribas takes licenceJune 2015
Solactive AG (‘Solactive’), a German index provider head-quartered in Frankfurt that develops, calculates and distributes tailor-made indices globally, launched its Solactive oekom Ethical Low Volatility Index this May, writes Roger Aitken.
Published in Euros, this is a total return index based on 100 as at the close of business on 21 January 2000. By 25 May 2015 it was standing at 254.58 points.
The Index was specifically created to track the price movements of low volatility stocks passing the Environmental & Social Governance (ESG) screenings of oekom research, a leading rating agency for sustainable investment. BNP Paribas has also licensed the oekom Ethical Low Volatility Index to launch a wide range of products spanning capital protected to more complex structures designed for both retail and institutional clients in Austria, Germany and Scandinavia.
Steffen Scheuble, Solactive AG’s ceo, commenting said: “The Solactive oekom Ethical Low Volatility Index is the perfect example of our capacity to provide efficient exposure to a specific market in a timely manner.” He added: “This innovative ethical index benefits from both the comprehensive screenings of oekom research and the interesting built-in feature around historical low volatility.”
The index universe provided to Solactive by oekom research is undertaken on a quarterly basis, which comprises European companies meeting what are described as minimum “sector-specific sustainability management requirements” and that have been awarded so-called oekom ‘Prime’ status.
Companies in the selected universe are further screened for controversial business areas including alcohol, coal, gambling, GMOs, military, nuclear power or tobacco, as well as controversial business practices that cover business malpractice, controversial environmental practices, human rights or labour rights. Constituent companies can be removed from the pool should they violate these exclusion criteria.
Solactive selects stocks from the starting universe that are incorporated or listed in developed Europe and have a 20-days average daily trading volume of at least €10 million (c. US$10.88m/£7.07m). Stocks are ranked by inverse historical volatility over the past 130 days in their local currency.
The Index is composed of the top 30 stocks that are weighted by inverse historical volatility and has amongst its top 10 components: Swiss Re AG (4.04%), Nestlé SA (4.01%), Hannover Ruck (3.96%), National Grid Plc (3.82%), Legal & General Plc Ord (3.63%) and Unilever Plc (3.59%).
Michael Schuelli, Head of Structured Solutions (Germany & Austria) at BNP Paribas Global Markets, stated: “We are enthusiastic about the benefits this index [Solactive oekom Ethical Low Volatility Index] will bring to our clients across the region and the strong potential it offers in creating solutions which bring a financial return to our clients, while meeting their ESG investment goals. Furthermore, we are confident it brings both transparency and good judgement to this space.”
Julia Haake, director of oekom research’s Paris office, asserted that: “Oekom research’s high-quality analyses form the ideal basis for an index with high sustainability standards.” In selecting constituent companies for the Solactive oekom Ethical Low Volatility Index “very rigorous criteria” are applied according to Haake. She further added: “The Index thus provides sustainable investors with guidance on which companies have systematically integrated sustainability into their management systems.”
Solactive calculates indices across all asset classes for 175 clients in Europe, America and Asia, with c.US$25bn invested (at 31 December 2014) in products linked to indices calculated - primarily via 170 exchange traded funds.
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