The Warsaw Stock Exchange (GPW) has unveiled a new equity index which provides exposure to blue-chip stocks listed in Poland while tilting to those with the strongest environmental, social, and governance (ESG) profiles.

The index provides exposure to Polish equities while tilting to firms with the strongest ESG profiles.

The WIG-ESG Index includes 60 of the largest and most-liquid securities trading on GPW, deriving its constituents from the large-cap WIG20 Index and mid-cap mWIG40 Index.

Constituents are assigned ESG scores using insights from Amsterdam-based ESG analytics firm Sustainalytics.

The ratings are based on a company’s exposure to industry-specific ESG risks, and how well the company is managing those risks.

Sustainalytics uses a multi-dimensional approach to arrive at a quantitative assessment of unmanaged ESG risk that is comparable across and within industries.

GPW also investigates each constituent’s degree of compliance with corporate governance principles laid down in its Code of Best Practice for GPW Listed Companies. The analysis is based on the number of principles respected and the quality of published statements of compliance.

Constituents are weighted by modified free-float market capitalization with greater weights assigned to firms with higher ESG scores and stronger compliance with GPW’s Code of Best Practice. Capping is used to limit exposure to the largest stocks in the index.

Izabela Olszewska, Member of the GPW Management Board, commented, “The first edition of WIG-ESG Index primarily aims at drawing the attention of companies and potential investors to ESG criteria in the investment decision-making process. We believe that in the coming years, ESG scoring will have a greater impact on both the weighting of each company and the index’s portfolio.”

The index builds upon GPW’s existing promotion of ESG standards amongst locally listed companies, most notably the RESPECT Index. Launched ten years ago, RESPECT consists of Polish companies with high ESG profiles as determined by the completion of a voluntary questionnaire. The index currently has 31 constituents.

Poland’s economy and capital markets have undergone positive developments in recent years including advances in infrastructure, trading security, and post-trade services. This resulted in Poland being promoted to a developed economy in September 2018 by index provider FTSE Russell, becoming the first Eastern European country to attain the status.

MSCI still classifies the country as an emerging market.

Poland also introduced its first ETF – BETA WIG20 ETF (BETAW20T PW) – to have a primary listing on GPW at the start of the year. Introduced by Warsaw-based asset manager AgioFunds, the fund provides exposure to the WIG20 Index and comes with an expense ratio of 0.40%.