Consultation CAC 40 ESG and MIB ESG - Euronext exchange Live quotes

Background

Euronext would like to consult on proposed changes to the Index Universe, ranking and selection mechanisms of the CAC 40 ESG.

In addition Euronext would like to consult on a proposed changes to the eligibility screening of the CAC 40 ESG and MIB ESG indices.

Proposed change to the Index Universe and selection mechanism of the CAC 40 ESG

In order to have a wider Index Universe and to reinforce the selection principle of the Index it is proposed to change the Index Universe of the CAC 40 ESG to the SBF 120. In addition to ensure more stability in the composition of the Index it is proposed to apply the buffer zone currently applied at Quarterly Reviews at the Annual Review as well, as well as to give priority to current constituents of the Index when ranking equally on ESG score.

Updated text for the Index Universe:

Current Rule:

The Index Universe consists of the Companies included in the CAC Large 60 index; at reviews this means included after the Review Effective Date.

Proposed new Rule:

The Index Universe consists of the Companies included in the SBF 120 index; at reviews this means included after the Review Effective Date.

Updated text for the buffer zone:

Current Rule:

Initial selection at annual review

During annual reviews (in September), the initial selection consists of the 40 highest ranking Companies based on the ESG ranking.

Initial selection at quarterly review

During quarterly reviews, 40 Companies are selected. The 35 highest ranking Companies are automatically included in the initial selection. A buffer zone, consisting of Companies ranked 36^th to 45^th is created. Current constituents of the index in the buffer zone have priority over Companies that currently do not form part of the CAC 40 ESG.

Proposed new Rule:

Initial selection at reviews

During reviews, 40 Companies are selected. The 35 highest ranking Companies are automatically included in the initial selection. A buffer zone, consisting of Companies ranked 36^th to 45^th is created. Current constituents of the index in the buffer zone have priority over Companies that currently do not form part of the CAC 40 ESG.

Updated text for the ranking:

Current Rule:

The eligible Companies are ranked by decreasing order on the ESG score as assigned by Moody’s ESG Solutions. In case of an equal score the Company with the highest free float market capitalisation will rank higher.

Proposed new Rule:

The eligible Companies are ranked by decreasing order on the ESG score as assigned by Moody’s ESG Solutions. In case of an equal score the Companies that are currently included in the Index will rank higher, followed by Companies with the highest free float market capitalisation.

Proposed changes to the eligibility screening of the CAC 40 ESG and MIB ESG

In order to align with the most up to date market practices and latest scientific views ^[1]Euronext proposes to add additional activity exclusions on unconventional oil & gas activities. The following filters are proposed to be added:

Offshore arctic drilling
Ultra-deep offshore drilling
Coal-bed methane
Hydraulic fracturing

Proposed updated activity exclusions table (new elements highlighted in yellow) :

Exclusion type	Description	Revenues
UN Global Compact controversies	Companies with active critical controversies related to UNGC are excluded (As defined in “2.2 Continuous eligibility screening”).	-
Tobacco	Companies with any involvement in the production of tobacco. Companies with revenues above 10% derived from distribution of tobacco are excluded.	>0% ≥10%
Coal	Companies with any involvement in Thermal Coal Mining are excluded. Companies with revenues above 5% from Coal-fuelled power generation are excluded.	>0% ≥5%
Tar sand and oil shale	Companies with any involvement in Tar sand and oil shale extraction are excluded.	>0%
Offshore Arctic Drilling	Companies with any involvement in Offshore Arctic Drilling are excluded	>0%
Ultra-Deep offshore drilling	Companies with any involvement in Ultra-Deep offshore drilling are excluded	>0%
Coal-bed Methane	Companies with any involvement in Coal-bed methane are excluded	>0%
Hydraulic fracturing	Companies with any involvement in Hydraulic fracturing are excluded	>0%
Civilian firearms	Companies with revenues above 5% derived from the production or sale of civilian firearms are excluded.	≥5%
Controversial Weapons	Companies that are involved in the following weapons considered as controversial by Moody’s ESG Solutions: biological weapons, chemical weapons, blinding laser weapons, incendiary weapons, non-detectable fragments, depleted uranium, white phosphorus., with involvement type Full weapons system – munitions, are excluded Companies that are involved in the following weapons considered as controversial by Moody’s ESG Solutions: Anti-Personnel Landmines, cluster munitions are excluded	>0% >0%

_{^[1]See e.g : Recommandations-n2-du-Comite-Scientifique-et-dExpertise-de-lObservatoire-de-la-finance-durable_22092021-002.pdf (finance-climact.fr)}

Timeline of changes

Stakeholders will have till the 17th of November to react to the consultation. The new rules, if validated by Index Design and the Independent Supervisor of the Indices, will be implemented as of the March 2024 Review of the indices.

Questions on the proposed changes

Do you agree with the proposal of changing the Index Universe to the SBF 120?

If the Index Universe is changed to the SBF 120, do you believe additional liquidity criteria in terms should be added?

Do you agree with applying the buffer zone at Annual Reviews as well?

Do you agree with given a higher rank to Companies currently included in the index in case of equal ESG score?

Do you agree with the proposal of excluding Companies involved in additional unconventional oil and gas activities?

Any other suggestions?

Additional questions on the methodology of the indices

Besides the concrete proposal mentioned in the consultation and anticipating further evolutions of the methodology of the indices, Euronext would like stakeholders to express their views on additional topics:

Do you believe the Index should exclude Companies involved in conventional oil and gas activities in addition to unconventional oil and gas?

Contact details

First name

Last name

Company/institute name