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Ethical Europe Climate Care Index

The Index was launched on 20 August 2015 and is calculated by Solactive AG, a German provider set up in 2007 and specialized in financial indices. Its components are selected based on the research of Vigeo, a company set up in 2002 that is specialized in the assessment of the environmental, social and governance responsibility (”ESG”)2.

 

The Ethical Europe Climate Care Index is composed of 30 European large caps. The Index includes companies on the basis of their carbon footprint and – because this criterion alone is not enough to combat climate change over the long term – the soundness of their energy transition strategy. ESG compliance and financial filters are also applied.

Selection on the basis of an ESG filter

Vigeo verifies how much the companies apply the environmental, social, and governance (ESG) criteria. Each company is given a score on this basis.

 

  • Best-in-Class approach: Selection of European companies with a score:
    1. higher than the European average AND 2. higher than the sector’s average
  • Ethical exclusion filters
    This selection excludes companies that:

    • generate more than 5% of their turnover from the nuclear sector;
    • present significant interests in the production or distribution of tobacco and weapons;
    • are involved in serious controversies on human rights, labour law as defined by the International Labour Organisations, or the environment.

Approximately 250 companies remain after the first filter is applied.

« Climate Care » selection

  • Assessment of the CO2 footprintVigeo gives a score to the companies on the basis of their CO2 emissions and classifies them into four categories:
    A.Moderate CO2 emissions B. Significant CO2 emissions
    C. High CO2 emissions Intense CO2 emissions
  • Energy transition assessment strategy
    Vigeo evaluates each company on precise criteria specific to its sector. Each sector faces different environmental issues. Vigeo measures the commitment and momentum shown by the company in terms of energy transition and assigns a score out of 100.
    For its final selection, Vigeo takes into account the company’s carbon emissions and its energy transition score. The more intense the emissions, the higher the energy transition score must be.
    Companies in category D are those of the most polluting sectors, such as the energy sector. These companies are not excluded, but a more stringent policy is applied: only the companies that have the most solid energy transition strategy of their sector and show concrete targets for reducing their emissions will be chosen to be part of the Index. These companies receive a letter of commitment, their response and commitment being necessary to continue to be part of the Index. The letter and the responses of the companies will be published on the Index’s website at www.ethicalclimatecare.com/europe, with the goal of engaging the most polluting industries about their environmental strategy.

Approximately 120 companies remain after the second filter is applied.

Selection on the basis of financial criteria

  • Liquidity: Selection of the most liquid companies (presenting an average daily exchange volume over 20 days of a minimum of EUR 5 million).
  • Dividends: Selection of the companies with sufficient market liquidity and financial soundness by exclusion of 50% of the companies with the lowest expected dividend yield.
  • Volatility: Selection of the 30 equities presenting the lowest historical volatility over a period of six months. These 30 equities are then weighted according to their volatility. The least volatile equity will thus have the greatest weight in the Index. The volatility (and therefore the risk) of the Index remains as limited as possible.
  • Sector control: A maximum of six companies are chosen for each economic sector. If the number of equities remaining after this filter is applied is less than 30, the composition is expanded to the other equities that have the lowest volatility over a period of six months until the number 30 is reached. The Index is not overexposed to one sector in particular.

Approximately 30 companies remain after the third filter is applied.

Conclusion

This rigorous method aims to identify the equities of companies that:

 

  • are the most ethical, socially responsible, and sustainable;
  • make the biggest efforts as part of an energy transition;
  • are able to distribute high dividends (dividends, however, are not reinvested into the Index – see « More information » section); and
  • present a controlled risk profile.

More information

Equities are subject to upward and downward price movements. These variations may be limited within a fluctuation range that measures, as a percentage, the positive and negative differences in relation to an average performance level. In financial terms, this interval is expressed by the notion of volatility. As such, saying that an equity has a volatility of 5% means that in most observed cases, the equity fluctuates between +5% and -5% around its average performance.

 

The Ethical Europe Climate Care Index is a Price Return index. This means that dividends distributed by this index’s equities are not reinvested into it and therefore have no direct influence on its performance, unlike a Total Return index. Consequently, the performance of an index with non-reinvested dividends is lower than the performance of an index with reinvested dividends.

Composition as of 28 October 2015

Company Name Country Sector ISIN Code Weighting
AstraZeneca United Kingdom Pharmaceuticals & Biotechnology GB0009895292 3.1%
Bpost Belgium Transport & Logistics BE0974268972 3.2%
British Land United Kingdom Financial Services – Real Estate GB0001367019 3.7%
British Sky Broadcasting United Kingdom Broadcast & Advertising GB0001411924 3.5%
BT Group United Kingdom Telecommunications GB0030913577 3.2%
G4S United Kingdom Business Support Services GB00B01FLG62 3.4%
GlaxoSmithkline United Kingdom Pharmaceuticals & Biotechnology GB0009252882 3.5%
Hammerson United Kingdom Financial Services – Real Estate GB0004065016 3.5%
Koninklijke DSM Netherlands Chemicals NL0000009827 2.8%
Legal & General United Kingdom Insurance GB0005603997 3.7%
Marks & Spencer United Kingdom Specialised Retail GB0031274896 3.0%
Munich Re Germany Insurance DE0008430026 3.9%
Nestlé Switzerland Food CH0038863350 3.7%
NEXT United Kingdom Specialised Retail GB0032089863 4.2%
Pearson United Kingdom Publishing GB0006776081 2.4%
Philips Netherlands Technology – Hardware NL0000009538 2.9%
Red Eléctrica Corporación Spain Electric & Gas Utilities ES0173093115 3.5%
Roche Switzerland Pharmaceuticals & Biotechnology CH0012032048 3.0%
Schneider Electric France Electric Components & Equipment FR0000121972 2.5%
Siemens Germany Electric Components & Equipment DE0007236101 2.8%
Swiss Re Switzerland Insurance CH0126881561 5.0%
Swisscom Switzerland Telecommunications CH0008742519 4.0%
Telefonica Spain Telecommunications ES0178430E18 2.8%
Telenet Belgium Telecommunications BE0003826436 3.2%
Telenor Norway Telecommunications NO0010063308 2.9%
Teliasonera Sweden Telecommunications SE0000667925 3.0%
Terna Italy Electric & Gas Utilities IT0003242622 3.8%
United Utilities Group United Kingdom Waste & Water Utilities GB00B39J2M42 3.3%
Vinci France Heavy Construction FR0000125486 3.4%
Zurich Financial Services Switzerland Insurance CH0011075394 3.0%
1
Under the conditions specified in the Final Terms.
2
For more information about Solactive AG and Vigeo, visit www.solactive.com and www.vigeo.com
Sources : Solactive AG and Vigeo
Further information in respect of the Index (including its daily closing price, its components and the selection process) can be found on the website www.ethicalclimatecare.com/europe