Nasdaq Nordic is is launching a version of its benchmark OMX Stockholm 30 index that is compliant with environmental, social and governance investing, which it said is the first ESG index based on a leading exchange-traded index.
Based in Stockholm, Nasdaq Nordic, owns and operates exchanges in Denmark, Finland, Iceland, Sweden and a commodities derivatives exchange in Norway.
The exchange said in an email that the OMX Stockholm 30 ESG Responsible Index has been constructed in order to create an ESG-compliant version of the OMX Stockholm 30 index that can be used by relevant funds, ETFs, structured products and derivatives. The new index is based on the 30 most traded securities on Nasdaq Stockholm with a systematic rule-based ESG screening developed with ISS-Ethix.
Nasdaq Nordic said in an email: “Due to the market leading position and expertise in the field of responsible investing. ISS-Ethix has been an ideal partner in developing this index.”
Similar ESG-compliant indices will be launched in Denmark and Finland in the autumn, based on the OMX Copenhagen 25 and OMX Helsinki 25 respectively. Nasdaq Nordic said: “This is the first ESG index based on a leading exchange traded index.”
The index has been developed with some of exchange’s largest members due to demand from their investors and new products based on the index are expected to be released in the future.
Lauri Rosendahl, senior vice president for European equities and president of Nasdaq Nordic, told Markets Media last month that the owners of capital are beginning to think about how their money is being used.
He said: “I believe that sustainability and green finance will have the biggest impact on investments and asset management over the next three to five years.”
In another move that promotes sustainable investment, Japan Exchange Group and London Stock Exchange Group said they that they have agreed to identify and collaborate on financial market infrastructure initiatives designed to encourage green finance.
The two exchanges said in a statement that they have begun identifying areas for mutual collaboration and innovation across the full spectrum of ESG finance. They are also both exchanges in the United Nations Sustainable Stock Exchanges.
Akira Kiyota, group chief executive of JPX, said in a statement: “With the partnership with LSEG, JPX hopes to contribute to the spread of ESG investment and the establishment of a sustainable society in collaboration with domestic and foreign public institutions, investors, listed companies, market participants, and other stakeholders."
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The Japanese exchange established a Sustainability Committee at the start of this month to promote ESG activities. This year's strategy includes launching a dedicated web platform for publishing data for ESG-related bonds and expanding the infrastructure fund market to encompass renewable energy projects.
In the green bond market NN Investment Partners, the Dutch fund manager, said that it had a significant increase in assets under management in the second quarter of this year. NN IP said in a statement that its green bond assets have increased from €20m ($24m) in 2016 to approximately €90m this month and is expected to grow to over €1bn.
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The fund manger said the NN (L) Euro Green Bond Fund has become the world’s largest green bond fund with €560m in assets under management.
Bram Bos, lead portfolio manager green bonds at NN IP, said in a statement: “Our clients indicate that green bonds play an increasingly prominent role in portfolios and welcome the rapid growth of the green bond market. Issuers recognize our strong position in green bonds. This allows us to influence new green bond placements and owing to our size, we are a welcome participant in new green bonds issues.”
Ann-Charlotte Eliasson, head of Nordic fixed income listings at Nasdaq, told Markets Media in March that sustainable bonds were a growth opportunity. Last year €1.7bn ($1.9bn) was raised on the Nasdaq Nordic Sustainable Bond Market, up 81% from 2016.
Sustainable bonds can list on the Nasdaq Stockholm main market or the smaller Nasdaq First North Bond Market. To be eligible, issuers need to meet the relevant criteria which Nasdaq has developed in cooperation with Sustainalytics, the producer of environmental, social and corporate governance research.
Nasdaq said it launched the first Sustainable Bond Market in the world in 2015 to make them more visible. Eliasson added: “We would like to improve liquidity and we are considering whether an index would help.”
Although listed issuers can self-certify on the use of green proceeds, they have to obtain an independent second opinion and report annually on progress of the project. Eliasson said the exchange may publish this data on its website to act as a central source of information, and to also help boost liquidity.
“We are also considering providing more information such as publishing all the green reports or second opinions,” she added.