GPW Launches the WIG-ESG Index
Added: 13.08.2019
Warsaw, 13 August 2019
GPW Launches the WIG-ESG Index
PRESS RELEASE
- GPW begins publishing WIG-ESG, an index comprising WIG20 and mWIG40 stocks
- Weighting of WIG-ESG participants will be based on free-float shares adjusted for ESG ratings provided by Sustainalytics and an assessment of compliance with GPW’s corporate governance principles
- WIG-ESG will be the underlying of a passive fund managed by NN Investment Partners TFI
The Warsaw Stock Exchange (GPW) will begin publishing a new index, WIG-ESG, on 3 September 2019. The index will include stocks participating in WIG20 and mWIG40, i.e., blue chips listed on GPW. As in the case of other indices, their weights will depend on the number and value of free-float shares, but these will be adjusted for ESG ratings and an assessment of compliance with the principles laid down in Best Practice for GPW Listed Companies 2016.
“In view of the dynamically growing market for responsible investing, we have decided to launch a new index, WIG-ESG. We are working in partnership with an independent firm of international standing which provides ESG research and ratings for some of the largest global investment firms and index providers. We are launching an investment product based on WIG-ESG in partnership with NN Investment Partners TFI: a fund whose investment portfolio focuses on ESG aspects. The first edition of WIG-ESG Index, primarily aims at drawing the attention of companies and potential investors to ESG criteria in the investment decision making process. We believe that in the coming years, environmental, social and governance scoring will have greater impact on both the weighting of each company and the index’s portfolio" - said Izabela Olszewska, Member of the GPW Management Board.
Leading global ESG research and ratings provider, Sustainalytics, is providing the company ESG Risk Ratings, which are among the criteria underpinning the index weights. Sustainalytics’ ESG Risk Ratings measure a company’s exposure to industry-specific material ESG risks, and how well the company is managing those risks. The firm’s multi-dimensional way of measuring ESG risk combines concepts of management and exposure to arrive at a quantitative assessment of unmanaged ESG risk that is comparable both across and within industries.
The weighting of index participants also depends on the degree of compliance with the corporate governance principles laid down in the Code of Best Practice for GPW Listed Companies 2016. Based on companies’ public statements of compliance, the Exchange will determine their weighting depending on the number of principles respected and the quality of the published statements.
Index data will be published every minute from the opening to the closing of each trading session. The participation of the largest stocks in the index portfolio will be capped according to funds’ investment rules. WIG-ESG will be a total return index and will be the underlying of the index fund of NN Investment Partners TFI.
“NN Investment Partners TFI integrated ESG aspects (environment, society, governance) in our investment process as early as 2016. We now include ESG criteria in the management of all funds we offer. To launch a Polish passive fund tracking an exchange index comprising companies which follow high standards of corporate governance, mitigate their environmental impact and are socially responsible, we first had to develop such an index. We considered several partners, including foreign entities, and selected the Warsaw Stock Exchange, which is a competent and flexible partner,” said Robert Bohynik, NN Investment Partners TFI Board Member and Investment Director.
The NN Indeks Odpowiedzialny fund will be created by transformation of the fund NN Akcji 2 (Shares 2), whose assets stand at PLN 1.6 billion. The criteria of stock liquidity and company size are key to the calculation of WIG-ESG.
“NN Investment Partners TFI funds integrate ESG aspects in the investment process to different degrees. We offer a portfolio which only invests in companies (mainly foreign) which pursue the UN sustainable development goals (UN SDGs); we offer funds which invest in companies with the highest ESG scorings (including Polish companies); and we also offer funds which exclude investments in companies that do not improve their ESG score. NN Indeks Odpowiedzialny will be a fund of the latter type. Its portfolio will include the stocks of companies which may not be ESG leaders, but are working to improve. We are launching such funds to support positive change and put issuers under pressure so they mitigate their environmental footprint and follow superior corporate governance standards,” said Robert Bohynik.
According to a survey conducted by NN Investment Partners, in partnership with the European Centre for Corporate Engagement (ECCE) at Maastricht University, portfolios comprising the stocks of companies which may have only an average ESG scoring, but are working to improve their performance, deliver a Sharpe ratio higher than stock portfolios of companies with insufficient scoring. A high Sharpe ratio implies return on an investment is generated with relatively low volatility in prices.
Institutional and retail investors are attaching growing importance to responsible investing. At the start of 2018, global assets of SRI (S-ocially R-esponsible I-nvesting) funds stood at USD 30.7 trillion, representing a 34% rise compared to 2016. European funds have the largest share in the global market, with assets under management at US$ 14.1 trillion, followed by US funds, with assets of US$ 12.0 trillion (GSIA1 figures as at the start of 2018). According to a 2018 Eurosif survey, ESG integration is a fast-growing investment strategy in Europe (up by a factor of five in 2013–2017). In particular, the share of ESG assets in the portfolios of retail investors grew by a factor of nine, from 3.4% in 2013 to 30.7% in 2017.
GPW has promoted the highest ESG standards among listed companies for many years. Over the past 10 years, GPW has been publishing the RESPECT Index, which successfully achieved its educational role. In contrast, WIG-ESG will have a strong investment profile. GPW will publish both the WIG-ESG and RESPECT Index until the end of 2019, but WIG-ESG exclusively as of 1 January 2020.
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1 GSIA – Global Sustainable Investment Alliance
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The Warsaw Stock Exchange Group (GPW Group) operates trading platforms for shares, Treasury and corporate bonds, derivatives, electricity and gas, and provides indices and benchmarks including WIBOR and WIBID. The index agent FTSE Russell has classified the Polish capital market as a Developed Market since 2018. The markets operated by the GPW Group are the largest in Central and Eastern Europe. For more information, visit www.gpw.pl
