Announcement – Methodology Change  | Solactive ISS Paris Aligned Select 0-1 Year Euro Corporate IG Indices  | Effective Date  29 February 2024

Today, on the 26th February 2024, Solactive announces the following changes to the guidelines of the indices listed in the table at the end of this announcement (the ‘Affected Indices’):

Changes to the Index Guidelines:

Section 2.2  has be updated, effective 29.02.2024:

Older version: 

On each SELECTION DAY each INDEX COMPONENT is weighted using an optimization algorithm. This algorithm determines the optimal weights of each INDEX COMPONENT. The objective function of the optimization is the minimization of the average GHG EMISSIONS of the INDEX, subject to the following constraints:
– The aggregated weight of all INDEX COMPONENT must be equal to 100%
– All instrument weights need to be strictly bigger than zero.
– The weighted average GHG EMISSIONS of the INDEX must be equal to the TARGET GHG EMISSION.
– Rating Bucket – the weight of each rating bucket (AAA, Aa1, Aa2, etc.) in the INDEX may only
deviate by +-2% from the weight of the same bucket in the BENCHMARK INDEX.
– Sector Bucket – the weight of each sector bucket in the INDEX is only allowed to deviate by +/-
5% from the weight of the same bucket in the BENCHMARK INDEX.
– Issuer Bucket – the weight of each issuer in the INDEX is only allowed to deviate by +/-4% from
the weight of the same issuer in the BENCHMARK INDEX, unless the issuer is excluded from the
INDEX. Additionally, an absolute Issuer weight cap of 5% is applied.
– Turnover – turnover is defined as two-way turnover. The turnover of the INDEX is limited to
exceed the monthly turnover of the BENCHMARK INDEX by 5%. Turnover is calculated using all
information as of SELECTION DAY.
In case the optimization is unable to find a feasible result the constraints are loosened until a
solution can be found.
On the initiation of the index on the BASE DATE the weighted average GHG EMISSIONS of the INDEX were reduced by 50% compared to the weighted average GHG EMISSIONS of the BENCHMARK INDEX.

Updated version:

On each Selection day the weighting of the Index components is conducted with the following procedure.
The overall goal is to find a bond weight combination that fulfills all carbon emission thresholds while
minimizing overall index turnover and maintain the risk profile of the benchmark index.
The index model uses both, gross carbon emissions and EVIC-normalized carbon intensities as carbon
measures. The thresholds are determined by the minimum of 50 % of the respective benchmark index value and the current trajectory value. Trajectory values follow a step-wise decreasing function with a semi-annual reduction of 3.5 %. On the base date of the trajectory, 50 % of the respective benchmark index value is used as a starting value.
To minimize trading costs and align the index to its un-filtered BENCHMARK INDEX, the sum of the preference-weighted turnover and risk factors is minimized. The bond’s rating, time to maturity, issuer and sector are factored in as risk dimensions.
To make sure the optimization algorithm is not assigning zero-weights to bonds, a minimum weight of 10
bps is added. For bonds entering the index the previous closing weight is set to the current market weight, giving the optimization an incentive to assign a non-zero weight to those bonds.

List of Affected Indices