Frankfurt They don’t like baking small rolls at Deutsche Börse, one of the largest European exchange operators. “We are convinced that the Dax 50 ESG will become the standard for sustainable investments in Germany,” said Stephan Flägel on Wednesday in Frankfurt.
He heads the index division at stock exchange subsidiary Qontigo, which among other things manages the index families Dax and Euro Stoxx. Now there is a new addition: the Dax 50 ESG.
50 stands for the stock companies represented there, 20 more than in its big brother, the leading German index Dax. ESG stands for ecological, social and governance criteria, i.e. values of good corporate governance, which should play a particularly large role for inclusion in the index. “The index meets the criteria that institutional investors and private investors place equal value on today,” says Flägel.
In plain language means: Investors who want to invest in German companies that are particularly ecological and responsible should take advantage of the Dax 50 ESG in the future. At least when it comes to the Deutsche Börse. In the coming weeks, the first provider wants to launch a corresponding fund that tracks the index, it is said.
The question arises which companies are included in the Dax 50 ESG. The companies are selected from the 89 values of the three major indices Dax, MDax and TecDax, i.e. the leading, average and technology index of Deutsche Börse. There are exclusion criteria: companies that produce so-called controversial weapons, operate significantly with coal and nuclear power and have serious governance problems are dropped.
Due to this narrow negative catalog, only four DAX companies failed from the start: Energy companies Eon and RWE are not included in the new index because of their coal and nuclear business, MTU because of its military production and Volkswagen because of the non-transparent handling of the diesel scandal.
Market capitalization as an important criterion
The candidates remaining after the negative test generally have the chance to land in the Dax 50 ESG. They are then selected according to the following criteria: market capitalization, exchange turnover and a sustainability assessment, which Deutsche Börse obtains from the specialist provider Sustainalytics.
Example Dax company: Based on these positive criteria, only three companies in the leading German index missed the Dax 50 ESG: the medical technology company Fresenius, the Vonovia housing group and the payment processor Wirecard. Why remained unclear. The stock exchange representatives could not explain the exact reasons for the non-move at the press conference on Wednesday.
The remaining team of the Dax, i.e. 23 of the 30 values, can be found completely in the new sustainability index. This leads to the curious situation that the largest values in the Dax also represent the largest values in the Dax 50 ESG: the chemical giant Bayer, which is struggling with the controversial Monsanto takeover, as well as Allianz, SAP, Linde and Siemens. The car maker Daimler is prominently represented, despite the diesel scandal.
According to Flägel, the main reason for this picture is the strong weighting of the market capitalization criterion: This was the way large investors brought it to the stock exchange, he explained. As a result, the composition of the new sustainability index does not differ fundamentally from the previous structure in the Dax, MDax and TecDax. The top dogs of the German economy are almost entirely included in the new “Standard for Sustainable Investments in Germany”.
Criticism of this concept comes from environmental associations. This is how Lia Polotzek, financial expert of the German Federation for the Environment and Nature Conservation, calls the Deutsche Börse approach “eyewashing”. “The new sustainability index is nothing more than green packaging. The index does not finance a transformation process towards a climate and environmentally friendly economy, ”Polotzek told the Handelsblatt.
“It includes environmentally harmful chemical, cement and aviation industry values as well as a company with BASF, whose wholly-owned subsidiary Wintershall adorns itself with being the largest German oil and gas producer. That is anything but sustainable, ”she said.
Kristina Jeromin, Head of Sustainability at Deutsche Börse, can understand such criticism in principle: “The financial sector is part of the social sustainability debate and reflects it. There cannot be changes overnight. ”The decision was made to deliberately map the breadth of the market with the index – but at the same time paying particular attention to companies that promoted the transformation towards a sustainable economy.
“If we had taken out all companies that do not already meet the requirements of the 1.5-degree target in the fight against global warming, there would be practically no value in the new index,” explains Jeromin. In the coming years, however, the ESG criteria would increasingly become the standard when investing.
Deutsche Börse plans to launch a double-digit number of additional sustainability indices in 2020. Then also with harder ones The promises in Frankfurt are criteria for particularly ecologically oriented investors.
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