Announcement – Methodology Change  | Solactive ISS Paris Aligned Select Euro Corporate IG Index  | Effective Date  29 February 2024

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

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%
– 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 INVESTABLE UNIVERSE.
– Maturity Bucket – the weight of each maturity bucket (1-5 Years, 5-10 Years, 10-15 Years, 15-20
Years, 25+ Years) in the INDEX is only allowed to deviate by +- 3% from the weight of the same
bucket in the INVESTABLE UNIVERSE.
– 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 INVESTABLE UNIVERSE. The financials sector bucket
may only deviate by +-1.5% from the respective bucket weigh tin the INVESTABLE UNIVERSE.
– 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 INVESTABLE UNIVERSE, unless the issuer is excluded from the
INDEX. Additionally an absolute Issuer weight cap of 5% is included in the index.
– INDEX COMPONENTS – the weight of each INDEX COMPONENT is only allowed to deviate by +0.5% and -0.05% from the weight of the INDEX COMPONENT in the INVESTABLE UNIVERSE, unless the
component is excluded from the Index.
– 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 in the
following order:
o Rating deviation is widened to 3%
o Issuer deviation is widened to 5%
o Sector deviation is widened to 7.5%
o Turnover constraint is widened to 7.5%
o Turnover constraint is widened to 10%
On the initiation of the index on the BASE DATE the weighted average GHG EMISSIONS of the INDEX was reduced by 50% compared to weighted average GHG EMISSIONS of the INVESTABLE UNIVERSE. Starting in August 2020 the TARGET GHG EMISSIONS of the INDEX is the minimum between a 50% GHG EMISSIONS reduction of the INVESTABLE UNIVERSE and the SELF-DECARBONIZATION TRAJECTORY of the 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.

Affected Index