The STOXX Paris-Aligned Benchmark Indices are meticulously designed for investors who prioritize aligning their portfolios with the objectives of the Paris Agreement. These benchmarks are constructed using liquid securities drawn from a selection of established STOXX Benchmark Indices, often including components of the Euro Stoxx 600. They adhere strictly to the EU Paris-aligned Benchmark (EU PAB) requirements, as detailed in Commission Delegated Regulation (EU) 2020/1818. This regulation supplements Regulation (EU) 2016/1011, setting minimum standards for EU Paris-aligned Benchmarks.
Eligibility and Exclusion Criteria for Paris-Aligned Benchmarks
To ensure the integrity and climate focus of the Paris-Aligned Benchmarks, a stringent selection process is in place. Several exclusion criteria are applied to determine the eligibility of companies. Firms identified by Sustainalytics Global Standards Screening (GSS) as non-compliant are excluded. This includes companies involved in controversial weapons or those displaying a Severe (Category 5) Controversy Rating from Sustainalytics. Additionally, tobacco producers, as identified by ISS ESG, are ineligible for inclusion in these benchmarks.
Furthermore, companies generating significant revenue from fossil fuel activities face exclusion. Specifically, securities with substantial revenues derived from coal, oil, and gas exploration or processing are not considered. The benchmarks also exclude companies heavily reliant on thermal coal-based power generation or those with high carbon intensity in their power generation. Companies deriving more than 10% of their revenue from thermal coal-based power generation, or more than 50% from power generation with lifecycle emissions exceeding 100gCO2e/kWh, are not eligible. Finally, STOXX excludes companies assessed by ISS ESG as having Significant Obstruction in achieving UN Sustainable Development Goals related to climate and environment (SDG 12, 13, 14, 15).
Weighting and Decarbonization Targets
The weighting process for the STOXX Paris-Aligned Benchmark Indices employs an optimization methodology designed to meet the minimum requirements outlined in the TEG report on climate benchmarks and benchmarks’ ESG disclosures. A core objective of these indices is significant decarbonization. The STOXX Paris-Aligned Benchmark Indices are engineered to achieve a minimum 50% reduction in greenhouse gas intensity compared to their underlying benchmarks, which can include the Euro STOXX 600. Moreover, they are structured to meet a demanding year-on-year decarbonization target of 7%.
Importantly, the methodology ensures that high climate impact sectors within the STOXX Paris-Aligned Benchmark Indices are not underweighted relative to the broader underlying benchmark, such as the Euro STOXX 600. This prevents unintended sector biases. In fact, the indices are designed to actively overweigh securities from companies with validated Science Based Targets, as verified by the Science Based Target initiative (SBTi). This focus on companies committed to science-based emissions reduction further enhances the climate alignment of these benchmarks.
For detailed information, including index guides, benchmark statements, and comprehensive reports, please refer to the Data tab on the official STOXX website.
