Announcements February 20, 2025

Methodology change | Solactive Europe Corporate Social Responsibility Index | Effective Date 21st February 2025

Today, on the 20/02/2025, Solactive announces the following changes to the methodology of the following Index (the ‘Affected Index’):

NAME	RIC	ISIN
Solactive Europe Corporate Social Responsibility Index PR	.SOLECSRP	DE000SL0AWB6

Rationale for Methodology Change

The current ESG data provider has decommissioned its services. As a result, Solactive has modified the methodology to ensure the index’s continuation while maintaining the integrity of ESG assessments and alignment with the index strategy.

Changes to the Index Guideline

The following Methodology changes will be implemented in the following points of the Index Guideline (ordered in accordance with the numbering of the affected sections):

Section 2.1. INDEX UNIVERSE REQUIREMENTS

From

The Index Universe is comprised of all financial instruments which fulfill the below requirements

(the “Index Universe Requirements“):

Securities with their primary listing on a regulated, major stock exchange that is part of the following Developed Markets (as defined and provided by the Data Provider):

– Europe: Austria, Belgium, Denmark, Finland, France, Germany, Ireland, Iceland, Italy, Luxembourg, Norway, Poland, Portugal, Spain, Sweden, Switzerland, the Netherlands, United Kingdom and Greece.

– North-America: Canada and USA.

– Asia-Pacific: Australia, Hong Kong, Japan, New Zealand and Singapore.

Following securities types are eligible:

– Common stock, preferred stock, real estate investment trust (REIT), stapled security, saving share, American depository receipt [ADR] and comparable depository receipts, tracking stock, royalty trust, unit, non-voting depositary receipt [NVDR], foreign share.

Data Provider develops a score from 0 to 100 by conducting an ESG research & controversial activities screening analysis that is entirely framed within the context of international guidelines and recommendations of bodies such as the UN Global Compact, the OECD, ISO, ILO, EU etc. Based on these organizations’ main reference texts (conventions, recommendations, statements, guiding principles etc.), Data Provider has identified more than 300 indicators linked to principles of action, which a company can respond to. These indicators are grouped into 38 sustainability criteria, which are classified into 6 domains. Then, Data Provider constructs sector frameworks for which it selects and weights the most relevant sustainability criteria to analyze. The sector classification is a one-level classification of 40 sectors (39 corporate sector and 1 local authorities) and each company is assigned to a sector by its ESG impact. Whenever new, relevant guidelines or reference texts are released (for example the EU Action Plan on Sustainable Finance), Data Provider assess whether its methodology already incorporates the key elements. If not, Data Provider amends the methodology so that it does assess companies against the principles found in that reference text or guideline.

Based on the ESG research & controversial activities screening analysis, companies are evaluated by the Data Provider through an inclusion/exclusion proprietary model in the field of Corporate Social Responsibility:

– Negative/Exclusion criteria: Companies having a major involvement in the following controversial activities are excluded from the Index Universe: tobacco, armament, nuclear energy, and gambling.

– Positive criteria: Identifying companies that have reliable and credible sustainable track records and/or business plans that contribute to a more sustainable world. An evaluation takes place within the sector. Company’s level of exposure to significant sectoral issues and sector-based risks and opportunities is taken into account. The evaluation is based on recognition of and actions in accordance with companies’ social responsibility by:

The formulation of clear and ambitious policies.
The allocation of effective resources.
The demonstration of measurable results.

– Other criteria: Apart from negative and positive criteria, contentious issues and controversies are considered:

Contentious or controversial activities: Companies involved in controversial activities are excluded from the Index Universe. The Data Provider considers the following activities as controversial: alcohol, animal welfare, fossil fuels, genetically modified organisms, hazardous chemicals and the sex industry.
Significant issues or controversies: Companies involved in significant issues or controversies are evaluated individually. These are companies that are discredited by certain practices, which may be reflected in conflicts, lawsuits or scandals. Essential factors, such as frequency, severity and how a company responds, determine how heavily a controversy weighs and whether the company will be added to the Index Universe.

Having taken all these criteria into account, the companies eligible to the Index Universe are selected by Data Provider.

The Index Administrator has outsourced the determination of the Index Universe to the Data Provider. Such outsourcing has been made in accordance with the requirements of the BMR (Article 10 BMR).

The Index Universe is comprised of all financial instruments which fulfill the below requirements

(the “Index Universe Requirements“):

Component of the Gbs Index Universe of the Solactive Europe 600 Index (ISIN: DE000SLA9G16), on a Selection Day. 2. Following securities types are eligible:

Following securities types are eligible:

Section 2.2. SELECTION OF THE INDEX COMPONENTS

From

Based on the Index Universe, the initial composition of the Index as well as any selection for an ordinary rebalance is determined on the Selection Day in accordance with the following rules (the “Index Component Requirements“):

The companies from Europe in the Index Universe (as defined by Data Provider) are evaluated in the field of Corporate Social Responsibility based on a 6-level rating scale provided by the Data Provider:

A: Pioneers (outstanding and/or innovative in terms of Corporate Social Responsibility; only the very best companies are included here. For many industries, this rating is non-existent)
B: Best-in-class companies
C: Companies that perform above average
D: Followers, companies performing below average
E: Laggards and/or non-transparent companies
M: Involvement in activities related to armament, gambling, nuclear energy and tobacco which automatically lead to exclusion

All companies from Europe that are covered and rated “A”, or “B” or “C” and that have no major involvement in exclusionary criteria or that are not excluded due to controversial activities won’t be removed from the selection process. Then, the following rules are applied to select the final composition:

- Remove companies that are a part of the Index but are no longer in the Index Universe on Selection Day.
- Index Components require an Average Daily Value Traded of at least USD 1,000,000 over the preceding 1-month and 6-month period.
- Remove companies whose Free Float Market Capitalization is less than 0.02% of the total Free Float Market Capitalization of the current Index as of Selection Day.
- Add new constituents to the Index by decreasing order (A, B, C) until the number of constituents in the Index is 200. A company with a Free Float Market Capitalization inferior to 0.05% of the total Free Float Market Capitalization on Selection Day after the previous steps were applied cannot be included to the Index.
- Rule of decision if equality: Within a given rating category (A, B, C), the company to be selected first is the one (i.e. ahead of other companies in the same rating category) with the biggest Free Float Market Capitalization.

The companies in the Index Universe are evaluated in the field of Corporate Social Responsibility based on a 4-level rating scale (A to D), utilizing data from two providers: Data Provider I and Data Provider II. The ratings are assigned as follows:

Rating A (Best-in-Class):

ESG Performance Score above 60
ESG Performance Score in the upper 1% percentile within sector
No Major Involvement in Controversial Activities (CAS): Weapons, Tobacco, Alcohol, Adult Entertainment, Gambling, Nuclear, and/or Fossil Fuel activities

Rating B:

ESG Performance Score between 50 and 60
ESG Performance Score in the upper 5% percentile within sector
No Major Involvement in Controversial Activities (CAS): Weapons, Tobacco, Alcohol, Adult Entertainment, Gambling, Nuclear, and/or Fossil Fuel activities

Rating C:

ESG Performance Score in between 30 and 50
ESG Performance Score in the upper 50% percentile within sector
No Major Involvement in Controversial Activities (CAS): Weapons, Tobacco, Alcohol, Adult Entertainment, Gambling, Nuclear, and/or Fossil Fuel activities

Or:

ESG Performance Score above 50
ESG Performance Score in the upper 5% percentile within sector
Major Involvement only in Alcohol, Adult Entertainment, and/or Fossil Fuel activities
No Major Involvement in other Controversial Activities (Weapons, Tobacco, Gambling, Nuclear)

Rating D:

Companies that do not qualify for ratings A, B, or C

All companies from Europe that are covered and rated “A”, or “B” or “C” and that have no major involvement in exclusionary criteria as provided by Data Provider II or that are not excluded due to controversial activities (as specified in the rating criteria above) won’t be removed from the selection process. Then, the following rules are applied to select the final composition:

Remove companies that are a part of the Index but are no longer in the Index Universe on Selection Day.
Index Components require Social Rating Score A, B, or C.
Index Components require an Average Daily Value Traded of at least USD 1,000,000 over the preceding 1-month and 6-month period.
Remove companies whose Free Float Market Capitalization is less than 0.02% of the total Free Float Market Capitalization of the current Index as of Selection Day.
Add new constituents to the Index by decreasing order (A, B, C) until the number of constituents in the Index is 200. A company with a Free Float Market Capitalization inferior to 0.05% of the total Free Float Market Capitalization on Selection Day after the previous steps were applied cannot be included to the Index.
Rule of decision if equality: Within a given rating category (A, B, C), the company to be selected first is the one (i.e. ahead of other companies in the same rating category) with the biggest Free Float Market Capitalization.

Section 6. DEFINITIONS

From

[…]

“Data Provider” is Moody’s. For more information, please visit: https://www.moodys.com/.

[…]

“DATA PROVIDER I” is ISS. For more information, please visit: https://www.issgovernance.com/.
“DATA PROVIDER II” is Minerva Analytics Ltd. For more information, please visit: www.minerva.info.
“ESG PERFORMANCE SCORE” is a numerical score in the range from 0 to 100 and received from DATA PROVIDER I.

[…]

“GBS INDEX UNIVERSE” is the INDEX UNIVERSE as defined in the guideline of the Solactive Global Benchmark Series (https://solactive.com/downloads/Guideline-Solactive-GBS-Benchmark-Series.pdf) for the GBS Index specified in Section 2.1.

[…]

“SOCIAL RATING SCORE” provides the rated entity’s social rating based on an assessment of performance across key social sustainability metrics, including staff and suppliers, health and safety, human rights, sector specific product responsibility, and other issues. The rating is graded on a twelve-point scale from A+ (excellent performance) to D- (poor performance). The score is provided by Data Provider II.

[…]

Defined terms used in this announcement, but not defined herein, have the meaning assigned to them in the respective index guideline of the Affected Index. The amended version of the index guideline will be available on the effective date : 21/02/2025.