Qontigo has licensed the STOXX Europe 600 Paris-Aligned Benchmark Index to Franklin Templeton as an underlying for an ETF. The index is part of the recently launched family of STOXX Paris-Aligned Benchmark (PAB) Indices, which help reduce exposure to climate-related financial risks and include companies that are well-positioned to provide solutions needed to transition to a low-carbon economy.
Rafaelle Lennox, Vice President, ETF Product Strategy, Franklin Templeton, says: “We are delighted to collaborate with Qontigo and are pleased to be the first provider to offer a Paris Aligned Climate ETF tracking the STOXX Europe 600 Paris-Aligned Benchmark Index. We believe that the STOXX Europe 600 is the key parent European benchmark for our clients and their portfolios. Our new European climate ETF will be on this very specific decarbonisation trajectory aligning with the Paris Agreement, which is unique. Additionally, since all stocks in the STOXX Europe 600 index are assessed for their climate profile, policies, alignment to 1.5c scenario as well as ESG criteria, this ETF can be used as a core sustainable allocation within investors’ portfolios.”
“We are delighted that Franklin Templeton will launch an ETF on the STOXX Europe 600 Paris-Aligned Benchmark Index. Our new climate benchmarks offer an opportunity to track the rigorous approach adopted by the European Commission and support the transition toward a low carbon economy. The STOXX PAB Index offers comparable volatility, returns, and diversification as its parent benchmark. Along with our EU Climate Transition Benchmark Index, the STOXX PAB is an important part of the overall Qontigo ESG Framework, helping investors integrate climate-change risks and opportunities into portfolios,” says Brian Rosenberg, Chief Revenue Officer at Qontigo.
The PAB indices track the performance of liquid securities from a selection of underlying STOXX Benchmark indices. They comply with, and exceed, the PAB requirements as laid out by the European Commission’s Technical Expert Group (TEG) Final Report.
The indices were constructed in collaboration with ISS ESG and Sustainalytics, two of the leading providers of sustainability data.
The index overweights climate leaders with a clear and proved evidence-based carbon reduction target and underweights the laggards. Furthermore, companies identified as non-compliant based on Sustainalytics Global Standards Screening (GSS) assessment or are involved in Controversial Weapons are not eligible for selection. Tobacco Producers, as identified by ISS ESG, are also not eligible. Securities that generate revenues above a certain threshold from coal, oil and gas exploration or processing activities are excluded. Additionally, securities that derive more than 10 per cent of their revenues from thermal coal-based power generation, or more than 50 per cent from power generation with carbon intensity of lifecycle emissions higher than 100g CO2 e/kWh are not considered for selection. STOXX will also exclude companies that ISS ESG assesses to have Significant Obstruction in the UN SDG 13.