Methodology Change | Solactive Green Bond Indices | Effective Date 23/03/2021

Today, on the 19/03/2021, Solactive announces the following changes to the methodology of the following indices (the ‘Affected Indices’):

Rationale for Methodology Change

Solactive has determined that to allow related products to be compliant with Article 9 of the Sustainable Finance Disclosure Regulations (SFDR) an additional ESG filter should be added to the selection criteria of the Affected Indices.  This additional ESG filter will exclude issuers that violate the UN Global Compact Principles as well as Sovereign issuers against which UN Sanctions are in place.

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):

SOLACTIVE GREEN BOND EUR USD IG INDEX

Section 2.1 Selection of the Index Components

From (old version):

“[…]

• Private Placements are excluded. However, if a RegS version of the 144A Private Placement is or becomes available, then the RegS version is included
• A pricing must be available from the Pricing Provider

[…].”

To (new version)

“[…]

• Private Placements are excluded. However, if a RegS version of the 144A Private Placement is or becomes available, then the RegS version is included
• The bond issuers are screened for ESG scores. The screening is done in the following areas
  • All the bonds are screened for ESG criteria using Sustainalytic’s “UN Sanctions” or “Global Compact Compliance” screening:
    • Global Compact Compliance: If the issuer is classified by Sustainalytics as non-compliant, the bonds will be excluded. If the corporate issuer has no data available, the bonds of this issuer will be excluded.
    • Country UN Sanctions: If the issuer is classified by Sustainalytics as non-sanctioned issuers, the bonds of this issuer will be included.
  • If a government issuer is not covered by either UN sanctions or Global Compact Compliance, the bonds of this issuer will receive the UN Sanctions score of the issuer’s country of incorporation
• A pricing must be available from the Pricing Provider

[…].”

SOLACTIVE GREEN BOND EUR USD IG INDEX

Section 2.1 Selection of the Index Components

From (old version):

“[…]

• The bond issuers are screened for ESG scores. If issuers are not covered by Sustainalytics, bonds may be included unless the issuer belongs to the Energy or Utilities sectors. If Sustainalytics covers the issuer, but has no data available for the specific screening, bonds will be included unless the issuer belongs to the Energy or Utilities sectors. The screening is done in the following areas:
  • Fossil fuels involvement: bonds will be excluded if issued by companies with a significant ownership or an exposure of 5% and above to fossil fuels, considering extraction and/or power generation
  • Nuclear energy involvement: bonds will be excluded if issued by companies with a significant ownership or an exposure of 5% and above to the production, distribution or support of products related to Nuclear Energy.
  • Controversial businesses: bonds will be excluded if issued by companies with a significant ownership or an exposure of 5% and above to controversial businesses. Retail companies should not have a revenue exposure to Alcoholic Beverages and Tobacco Products of 10% or greater. Issuers with any exposure to Military Contracting and Weapons, including Controversial Weapons and Small Arms will be excluded.
  • Global Compact Compliance: bonds will be excluded if issued by non-compliant issuers following Sustainalytics classification.

[…].”

To (new version)

“[…]

• The bond issuers are screened for ESG scores. If issuers are not covered by Sustainalytics, bonds may be included unless the issuer belongs to the Energy or Utilities sectors. If Sustainalytics covers the issuer, but has no data available for the specific screening, bonds will be included unless the issuer belongs to the Energy or Utilities sectors. The screening is done in the following areas:
  • Fossil fuels involvement: bonds will be excluded if issued by companies with a significant ownership or an exposure of 5% and above to fossil fuels, considering extraction and/or power generation
  • Nuclear energy involvement: bonds will be excluded if issued by companies with a significant ownership or an exposure of 5% and above to the production, distribution or support of products related to Nuclear Energy.
  • Controversial businesses: bonds will be excluded if issued by companies with a significant ownership or an exposure of 5% and above to controversial businesses. Retail companies should not have a revenue exposure to Alcoholic Beverages and Tobacco Products of 10% or greater. Issuers with any exposure to Military Contracting and Weapons, including Controversial Weapons and Small Arms will be excluded.
• The bond issuers are screened for additional ESG scores.  The screening is done in the following areas:
  • All the bonds are screened for ESG criteria using Sustainalytic’s “UN Sanctions” or “Global Compact Compliance” screening:
    • Global Compact Compliance: If the issuer is classified by Sustainalytics as non-compliant, the bonds will be excluded. If the corporate issuer has no data available, the bonds of this issuer will be excluded.
    • Country UN Sanctions: If the issuer is classified by Sustainalytics as non-sanctioned issuers, the bonds of this issuer will be included.
    • If a government issuer is not covered by either UN sanctions or Global Compact Compliance, the bonds of this issuer will receive the UN Sanctions score of the issuer’s country of incorporation

[…].”

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