Home Business The first certificates on the new sustainable index of Piazza Affari arrive

The first certificates on the new sustainable index of Piazza Affari arrive

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As everyone knows, the FTSE MIB is the main index of Piazza Affari which includes the 40 companies with the highest capitalization, selected without particular filters related to sustainability. In the last period, however ESG issues are becoming predominant (Environmental, Social and Governance i.e. environmental, social and corporate management) because the overall sustainability of companies is considered an increasingly necessary element for a better future. For this Euronext recently (October 18) launched the new index MIB ESG, the first ESG index dedicated to Italian blue-chips, designed to identify the large listed Italian issuers with the best ESG practices. This is Euronext’s second national ESG index, following the CAC40 ESG launched in March 2021.

Characteristics of the ESG MIB and differences with the FTSE MIB

Having said that, let’s go into the details of the new index to understand how it is composed and the differences compared to the FTSE MIB. The ESG MIB combines economic performance measurement with ESG assessments in line with i principles of the United Nations Global Compact. The composition of the index is based on an analysis of the ESG criteria by Vigeo Eiris, a company of Moody’s ESG Solutions, which evaluates the ESG performance of issuers. The methodology underlying the index provides for a ranking of top 40 companies based on ESG criteria, selected from among the 60 most liquid Italians and excluding those involved in controversial activities. The components of the index are weighted by free float market capitalization, with a cap of 10% applied to each stock in the basket.

But what are the differences compared to the FTSE MIB? In practice, based on the current composition, the two indices they differ in about ten companies, the other 30 are similar for both. More specifically, the members of the FTSE MIB that do not belong to the ESG MIB are Azimut, Buzzi, Campari, Diasorin, Exor, Fineco, Interpump, Inwit, Leonardo and Tenaris; while the MIB ESG components that are not part of the FTSE MIB are Anima, Brembo, Erg, Falck Renewables, Iren, Mediaset, Reply, Ferragamo, UnipolSai and Webuild.

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Who are the top ESG scorers in the index? In the first places we find Enel e Italian post tied with an evaluation (ESG Global Score by Vigeo Eiris) of 76; following Terna with a score of 69. Also in the top 5 Telecom Italia (68 points) e Pirelli & C (66 points). The composition of the ESG MIB will be reviewed on a quarterly basis to take into account those companies whose ESG performance has improved sufficiently to be included in the index.

New certificates to invest in the ESG MIB

The first certificates on the new MIB ESG share index were listed on the SeDeX of the Italian Stock Exchange from Societe Generale (SG). In particular, the leading bank on Borsa Italiana has issued two new 7x Long Fixed Leverage Certificates (ISIN DE000SF6UT37) e -7x Short (ISIN DE000SF6UT45) and a new non-leveraged Benchmark Certificate (ISIN DE000SF6UT03). These products, which they do not have a predefined expiration date (open-end), allow the investor to expose himself to the new ESG index of reference of the Italian market both in terms of trading and investment.

SG Certificates with Fixed Leverage 7x

But let’s go in order. The SG Fixed Leverage Certificates, classified as leveraged certificates according to the Acepi classification, indicatively replicate (gross of costs, taxes and other charges) the daily performance of the underlying (in this case the ESG MIB) multiplied by the positive fixed leverage ( 7x Long ISIN DE000SF6UT37) or negative (-7x Short ISIN DE000SF6UT45). They are products aimed at investors with a high risk appetite and who intend to exploit market movements in an amplified manner. Due to their characteristics, they are tools used by traders for short or very short term trading: if these are held for more than one day in his portfolio, the investor is subject to the so-called “compounding effect” or compound interest effect.

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This is due to the calculation method underlying the leverage count, which it is valid only intraday and is recalculated every day on the closing price of the underlying (in this case the ESG MIB) on the previous business day. For this reason, in the absence of directional markets, significant variations may emerge between the performance recorded by the product and those recorded by the underlying multiplied by the leverage and therefore continuous monitoring of the investment is necessary. We report the presence of two mechanisms that are an exception to the daily rebasing of the leverage: (i) the intraday adjustment, which occurs in the event of extreme and adverse market movements and is aimed at preventing the value of the product from becoming negative and (ii) the price event, which occurs in the event of a strong positive movement for the product, which foresees the absence of rebasing of the leverage on the next business day. This latter effect tends to limit the effect of compound interest in the product in the event of a correction of the underlying on the following day (taking profit after a strong rise or entry after a sharp fall).

SG Certified Benchmark, without leverage

Benchmark Certificates are a very different type of certificates from Fixed Leverage and expect their performance to be directly linked to that of the underlying to which they refer. Therefore, if the latter were to obtain a positive variation, then the certificate would also have it; in the event of a negative performance of the underlying, the certificate will also suffer the same fate.

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These instruments are part of the family of unsecured capital certificates according to the Acepi classification, which means that there is no protection of the amount invested in the event of a negative performance of the underlying. On the other hand, there is no limit to the potential earnings, which can be technically unlimited.

SG’s Benchmark Certificate (ISIN DE000SF6UT03) is therefore suitable for anyone wishing to make a investment in Italian equities with an ESG approach, not only in the short but also in the medium or long term. This is an investment aimed at those with upward expectations on the Italian stock market as it linearly replicates the performance of the MIB ESG index (gross of costs, taxes and other charges).

Finally, we remind you that the SG Benchmark Certificate has no predefined expiry date (open-end). In the event that an investor should subscribe to this instrument can choose independently when to close the financial position and consequently generate a profit in case of positive performance or receive a lower amount than invested in case of negative performance.

For more information on the products visit the site https://prodotti.societegenerale.it/

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