Euronext, in collaboration with Borsa Italiana, has launched a socially responsible alternative to the FTSE MIB, Italy’s foremost equity index.
The new launch represents Euronext’s second national ESG index.
The FTSE MIB consists of the 40 largest and most liquid stocks listed on the MTA and MIV markets of Borsa Italiana, broadly replicating the sector weights of the entire Italian stock market.
The newly minted MIB ESG Index is different in that it screens a parent universe consisting of the 60 most liquid Italian companies to identify the 40 firms with the best environmental, social, and governance practices.
The ESG methodology is powered by V.E (Vigeo Eiris), part of Moody’s ESG Solutions.
The methodology first excludes violators of UN Global Compact principles as well as companies with operations linked to tobacco, coal, tar sands, oil shale, civilian firearms, and controversial weapons.
V.E then assigns an ESG rating to each remaining firm in the universe. The rating incorporates 38 metrics across six ESG categories: environment, human rights, human resources, community involvement, business behaviour, and corporate governance. A firm’s performance across all 38 metrics is combined to produce an overall score between 0 and 100.
The 40 constituents with the highest ESG ratings are selected and initially weighted by float-adjusted market capitalization subject to an individual cap of 10%.
This index is then evaluated to determine whether there has been an improvement in weighted average carbon intensity (WACI) compared to the parent universe. If this measure has deteriorated, the index will reduce the weight of the security with the worst carbon intensity relative to its revenues, up to a maximum reduction of 30%, continuing with the next-worst carbon offender until WACI is superior to the parent universe.
The index is reconstituted annually with buffer rules helping to limit unnecessary turnover. Rebalancing occurs quarterly.
As of 18 October, the index’s largest sector exposures were banks (19.7%), automobiles (15.6%), conventional electricity (12.8%), integrated oil & gas (8.0%), full line insurance (6.7%), and semiconductors (6.2%). Notable positions included Intesa Sanpaolo (10.4%), Enel (9.7%), Stellantis (9.2%), Eni (8.1%), Unicredit (7.0%), Ferrari (6.4%), and Assicurazioni Generali (6.3%).
The MIB ESG Index is Euronext’s second national ESG index following the CAC40 ESG Index which launched in March 2021. This index, which represents a socially responsible version of the headline French equity index, the CAC40, has already been adopted by a $200m BNP Paribas ETF while Amundi has also announced plans to launch a new fund linked to this benchmark.
Current FTSE MIB ETFs in Europe include the $580m iShares FTSE MIB UCITS ETF (IMIB IM), the $110m Amundi FTSE MIB UCITS ETF (FMI IM), and the $50m Xtrackers FTSE MIB UCITS ETF (XMIB IM).
Stéphane Boujnah, CEO and Chairman of Euronext, said: “The MIB ESG Index is a critical contribution to a growing demand for sustainable investment tools from both institutional and private investors, and from the market as a whole. The index facilitates the adoption of mainstream ESG investment approaches by investors in Italy and in Europe. The first MIB ESG index also demonstrates the strong involvement in the ESG transition among most of the largest Italian-listed companies. Today’s launch is a significant milestone in the integration of Borsa Italiana within Euronext as both companies combine their respective strengths to make Italian capital markets more relevant than ever in the ongoing ESG transformation of the finance world.”
Sabine Lochmann, Global Head of ESG Measures at Moody’s ESG Solutions and President of V.E, added: “We are proud that our high-quality ESG data will power the MIB ESG Index through our continued collaboration with Euronext. Supporting this latest blue-chip index further demonstrates our ongoing commitment to support the integration of ESG factors in investment processes, and catalyze the global shift to a sustainable and responsible financial system.”