Signs Of ESG Growth: CME Launch S&P 500 ESG Mini Futures

In another sign of the increasing popularity of environmental, social and governance (ESG) investment strategies, the CME Group E-mini S&P 500 ESG Index futures. The new futures contracts are expected to debut on Nov. 18.

“Our new futures contracts will allow market participants to gain price exposure to an index that closely tracks the performance of the S&P 500 while adhering to ESG principles,” said Tim McCourt, CME Group Global Head of Equity Index and Alternative Investment Products, in a statement.

The new futures contracts will be linked to the S&P 500 ESG Index. That benchmark incorporates the risk and return of the S&P 500, a market-cap-weighted index of the 500-largest publicly traded companies in the U.S. while adding on environmental, social and governance criteria.

Noting ESG Indexing

According to the ESG indexing methodology, the new index will exclude tobacco producers, makers of certain weapons and companies with a low score in relation to the United Nations Global Compact principles for responsible businesses. The screens will be based on ESG rating provider’s Sustainalytics and Arabesque data.

“The S&P 500 ESG Index is a broad-based, market-cap-weighted index that is designed to measure the performance of securities meeting sustainability criteria while maintaining similar overall industry group weights as the S&P 500,” according to the CME statement.

S&P Dow Jones Indices explains how the index works.

Related: ESG ETF Assets More Than Double in 2019 

“To keep alignment with the S&P 500 and to exclude companies underperforming in ESG, companies are ranked within their S&P 500 GICS® industry groups by their S&P DJI ESG Scores. They are then selected, highest to lowest, with the aim of getting as close as possible to a market capitalization threshold of 75% within each industry group,” according to the index provider.

The Xtrackers S&P 500 ESG ETF (SNPE), which debuted in June, is the ETF tracking the S&P 500 ESG Index. SNPE already has over $96 million in assets under management. That ETF holds 316 stocks.

For more information on index-based ETFs, visit our indexing category.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.