The Solactive Euro IG Corporate SD-KPIndex was developed by incorporating a new weighting methodology to its parent index, the Solactive Euro IG Corporate index which is market-cap weighted, by over and underweighting the constituents depending on SD-M’s ESG scoring.
The index assigns issuers in the top-20% in terms of ESG scores a 50% overweight whereas the second 20% receive a 25% overweight. The medium quintile remains unchanged whereas the remaining quintiles receive an underweight of 25% and 50%, respectively.
SD-M’s methodology, SD-KPI, consists of three ESG indicators based on research and development with the German Federal Ministry and the Sustainability Accounting Standards Board.
The launch is the one of three indices SD-M has launched with Solactive having also released the Solactive USD IG Corporate SD-KIndex and Solactive GBP IG Corporate SD-KIndex.
Timo Pfeiffer (pictured), chief markets officer at Solactive, commented: "As capital markets continue to realise the importance of integrating ESG metrics into portfolio construction, we are proud to bring them a new bond index in collaboration with SD-M.
"This index integrates industry-specific ESG metrics in the European corporate bond market, focusing on those companies incorporating ESG into their business practices, while maintaining exposure to the broad market."