BBVA expands quantitative investment strategies business with Solactive Paris-aligned and climate transition indices
Spanish bank BBVA expanded its Quantitative Investment Strategies (QIS), a business focusing on the design, manufacturing, and distribution of investment strategies via self-created indices aimed at end investors.
Having established the QIS with its first index, the Solactive BBVA ixESG Global Leaders Index, the bank now added Solactive-owned Paris Aligned (PAB) and Climate Transition Benchmarks (CTB). The Solactive BBVA Climate Action PAB Europe Index and Solactive BBVA Climate Action CTB Europe Index enable conscious investors to invest in companies at the forefront of a green and sustainable global economy.
The Paris agreement serves as one of the most significant international conventions. Its main aim is to keep the increase of global average temperature below a critical threshol of 2°C. The release of the Final Report on Climate Benchmarks and Benchmarks’ ESG Disclosures by the EU Technical Expert Group on Sustainable Finance’s (TEG) set the foundation of benchmark-based Paris-aligned investment. BBVA included the two indices, the Solactive BBVA Climate Action PAB Europe Index and Solactive BBVA Climate Action CTB Europe Index, to tackle each of the respective climate targets individually.
The Solactive BBVA Climate Action PAB Europe Index provides exposure to a portfolio that, based on ISS ESG climate analysis, is in line with a well below 2ºC scenario through 2050, allowing investors to be at the forefront of an immediate transition towards the Paris Agreement’s goals. Both the Solactive BBVA Climate Action CTB Europe Index and Solactive BBVA Climate Action PAB Europe Index represent a baseline climate-aware allocation, which is set up to project the path towards a low-carbon economy rounding out the release.
The Solactive BBVA Climate Action CTB Europe Index features a 30 per cent reduction in carbon intensity versus its respective benchmark while the Solactive BBVA Climate Action PAB Europe Index takes a tighter approach with a 50 per cent reduction as well as additional activity-based exclusions. Both indices start from a set of baseline exclusions of controversial weapons and international norms violators. To select the index constituents, Solactive conducts a modified carbon risk rating approach, which pools the 125 stocks with the highest rating for the final index. The selection is then optimised to overweight the stocks with the best expected future CO2 performance while also meeting the requirements of the EU CTB and PAB regulation.
“The project kicked off in an unprecedented difficult time during a lockdown phase, but we have kept our focus to realise this important and impactful first set of indices, which all carry a strong ESG focus,” says Timo Pfeiffer, Chief Markets Officer at Solactive. “We feel honoured that BBVA has chosen Solactive as its index provider of trust for such a vital and meaningful investment vehicle, and it is always a pleasure for us to work with BBVA and its committed and dedicated team. We’re looking forward to intensifying our relationship with the release of more sustainability-focused indices with BBVA going forward.”