Globally, ESG Derivatives Are Taking Off

October 22, 2019 | ESG and Sustainability, News

ESG (environmental, social, and governance) based derivatives are ramping up volumes globally, raising expectations for innovative new products.

At NASDAQ Nordic, which launched futures based on the OMXS30 ESG Responsible index in October 2018, this is a landmark month. The trading of the ESG derivatives contract based on this index reached 1 million contracts. Moreover, in excess of 80% of this volume was accounted for by institutional clients.

The Nordic region is clearly a leader in the use of ESG derivatives. At asset manager Swedbank Robur, one of its index funds (Access Sweden) raised money through OMXS30 ESG. The fund is now fully invested. It even has money for cash redemptions. This is “a very real example of how sustainable investments create real value for investors,” said Magnus Linder.  He is responsible for derivative trading at the firm.

ESG derivatives at Eurex

In February this year, Deutsche Börse’s Eurex launched three futures covering STOXX Europe 600 ESG Exclusions, EURO STOXX 50 Low Carbon, and STOXX Europe Climate Impact.

Further, on October 21, the Eurex commenced trading in ESG options based on the STOXX Europe 600 ESG-X Index. Therefore, this development indicates that there was sufficient liquidity in the futures contract to permit trading in an option based on that index.

Indeed, the exchange said this month that trading in the STOXX Europe 600 ESG-X Index had now exceeded 362,000 contracts. At one point the notional value of the open interest was €1.2 billion. This was an “important milestone,” according to Vassilis Vergotis, Eurex.

ESG futures at CME Group

CME Group will roll out its ESG derivatives contracts, namely, E-mini S&P 500 ESG Index futures next month.

[Related Story: Purpose Investments Goes All-In on ESG Principles]


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