Solactive launches indices for ESG-focused high yield and investment grade bonds
As demand for ESG investments rises, German index provider Solactive has expanded its ISS ESG Screened Corporate Bond Index series, now pooling High Yield and Investment Grade Bonds denominated in EUR and USD in respective market value-weighted indices.
The new index families are tailored to investors seeking portfolio diversification, including only companies operating in accordance with recognised standards on ESG controversy screens, which, in light of increasing regulatory initiatives by political institutions, become more and more market standard.
As its underlying universe, the Solactive ISS ESG Screened Corporate Bond Index Series utilises the Solactive Investment Grade and High Yield Corporate benchmark families and trials its constituents through an issuerbased screening executed by ISS ESG. The screening contains the market standard criteria such as the UN Global Compact, verified involvement in controversial weapons, and engagement at specified revenue thresholds in certain controversial activities such as, among others, fossil fuels, military contracting, tobacco, and gambling.
Given the volatile nature of the current market, uncertainty surrounding global trade policies, and steadily rising interest rates, the Solactive ISS ESG Screened Corporate Bond Index Series offers a combination of both stability and income to investors seeking to navigate the current market environment. Since investment grade corporate bonds are issued by high-quality corporations, they are generally less volatile than the broad equity market, while their inherent credit risk can offer a higher yield compared to similar-maturity government bonds.
“ESG becomes the mainstream. This is an inevitable trend,” says Timo Pfeiffer, chief markets officer at Solactive. “For investors trying to diversify their portfolio in current market situations, we, together with ISS ESG, developed an index that serves as a suitable tool in times of uncertainty. This new release demonstrates our expertise in incorporating cutting edge exclusion standards into our fixed income indices.”
The expansion of the Solactive ISS ESG Screened Index Series corroborates the longstanding relationship between Solactive and responsible investment arm of Institutional Shareholder Services, ISS ESG.
Previously the two companies worked together in the creation of the Solactive ISS ESG Climate Transition Benchmarks, including both Climate Transition (CTB) and Paris Aligned (PAB) Benchmarks for equity, and notably, as the first offer in the market, Fixed Income variants, which are in line with a 2°C scenario through 2050, allowing investors to be at the forefront of an immediate transition towards the Paris Agreement’s goals.
The Solactive ISS ESG Screened Corporate Bond Index Series went live on 22nd of June.