Market index provider STOXX and financial technology and data services provider and exchange operator Intercontinental Exchange (ICE) announced today the launch of the STOXX ICE Fixed Income Sustainability indices, a new series of indices aimed at enabling investors to align their investments with the Paris Agreement climate goals.
According to STOXX and ICE, the new indices are being launched amidst increasing demand by investors for index based investing, and for climate-focused fixed income solutions. The new benchmarks include investment grade indices in currencies including U.S. dollars, euros, and sterling, among others, as well as high-yield bond indices in dollars and euros.
Axel Lomholt, General Manager at STOXX, said:
“Working with ICE Data Indices enables us to accelerate the delivery of fixed income benchmarks tailored to market demand. This collaboration brings together two leading financial companies and skill sets to launch and operate a suite of indices that addresses the growing demand for sustainable investment products in the bond market.”
The new indices include products aimed at complying with and exceeding the requirements of the EU’s Paris-aligned Benchmarks (PAB) and Climate Transition Benchmarks (CTB). Indices that are labeled as PABs must meet criteria for asset selection that results in the index aligning with the long-term climate goals of the Paris Agreement. Criteria include a minimum reduction in greenhouse gas (GHG) emissions intensity of at least 50% compared to the market index, with annual GHG emissions intensity reductions of at least 7%, among others. CTB criteria also include 7% annual decarbonization, and a 30% minimum reduction in GHG emissions intensity relative to the market index.
The methodology underlying the indices’ construction includes overweighting companies that have GHG reduction targets under the Science Based Targets Initiative (SBTi) and target a minimum ‘green-to-brown’ revenue ratio, while utilizing optimization to reduce the turnover and to track the performance of parent indices. The indices also include screens to exclude companies based on global norms, product involvement, controversies and activities that hinder certain UN Sustainable Development Goals (SDGs).
According to the companies, under the new collaboration, ICE will be responsible for pricing, reference data and index calculation services for the new indices, while STOXX, which developed the indices, will provide proprietary data and oversee the administration of the indices.
Chris Edmonds, President of ICE Fixed Income and Data Services, said:
“By combining STOXX’s experience in sustainability data and methodologies with our leading fixed income pricing, reference data and index calculation solutions, together we are creating powerful new benchmark products combining the expertise of two globally recognized and respected providers of data to fixed income markets.”
