CME Group

CME Launches ESG Product With Similar Return Profile to the S&P 500 Index

The world’s leading and most diverse derivatives marketplace is set to launch E-mini S&P 500 ESG Product Index futures, to be made available for trading on Nov. 18, 2019, pending regulatory review. These index futures are a new risk management tool that aligns with environmental, social and governance (ESG) values.

Tim McCourt

Tim McCourt, CME Group Global Head of Equity Index and Alternative Investment Products, said: “A growing number of institutional investors and asset managers have incorporated sustainable investing objectives into their strategies. 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. This is another example of how CME Group is not only meeting the changing risk management needs of our customers in an evolving global marketplace, but also offering choices that allow for the alignment of investment decisions with personal or institutional values.”

Reid Steadman, Global Head of ESG Indices at S&P Dow Jones Indices, commented: “We’re pleased that CME Group has developed E-mini S&P 500 ESG Index futures linked to our S&P 500 ESG Index. Investors are no longer simply viewing ESG indices and benchmarks as niche market tools, but are increasingly integrating ESG metrics to manage their core portfolios. We believe demand for innovative ESG index-based products, especially in the U.S. and Europe, will continue to grow and become more mainstream as market participants seek to better align their sustainability and investment goals.”

As 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, the ESG index’s new contracts will complement CME Group’s suite of equity index futures and options contracts, including its existing E-mini S&P 500 futures and options and Micro E-mini S&P 500 futures.

E-mini S&P 500 ESG Index futures will be cash-settled and will be subject to the rules and regulations of CME. As for benefits, the new contracts provide access to a new derivative solution for responsible investing, allowing investors to align their financial goals with environmental, social, and governance values. In addition, it allows to save on margin offsets with other equity index futures, and provides flexible execution, including Basis Trade at Index Close (BTIC) or block trades, offers multiple ways to find liquidity. CME expects the contract to obtain a similar return profile to the S&P 500 Index with the bonus of integrating ESG values.