BNP Paribas and Solactive have partnered for the launch of two indices that focus on the issue of governance within Europe and the US as part of a governance-focused index series.

The Solactive ISS Europe Quality Governance Select 50 index takes its initial population from the Solactive Europe 600 index, and the Solactive ISS Quality Governance index takes its initial population from the Solactive GBS Unities States Large & Mid Cap index and the Solactive GBS United Small Cap index.

A controversy screening is implemented to the initial populations which excludes companies significantly involved in areas such as tobacco, military equipment and gambling.

Provided by ISS ESG, each underlying security is assigned a governance score and consists of multiple factors such as internal auditing, board structure, shareholder rights and compensation.

BNP Paribas issues an index-tracker certificate which selects companies based on their governance impact.

In addition to a governance tilt, the indices also incorporate a low-volatility factor strategy designed by Solactive.

The launch is a result of Solactive highlighting recent environmental, social and governance (ESG) products only covering the three factors marginally instead of specialising in one field.

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Timo Pfeiffer (pictured), chief markets officer at Solactive, said in a statement: “In Europe, the idea of the incorporation of ESG factors in investors’ portfolios is far more advanced than in North America, which mainly has to do with recent local political initiatives such as the European parliament and also through public awareness driven by media-effective movements.”