For businesses and investors alike, sustainability and the responsible use of resources remain key issues just as much as the returns on their investments. In this context there is a need for approaches that combine the two elements of ecology and economy. As an innovative player in the ESG ratings and data sector, Switzerland-based Global Green Xchange AG offers not only solutions relating to ESG ratings and raw data, but also practical index and portfolio solutions linked to sustainability for asset managers, family offices and institutional investors. The GGX research team has launched the GGX Sustainable Dynamic Leaders Index family as a high-performance showcase combining ESG parameters and economic factors in a single index.
The stocks for this index are initially selected on the basis of the GGX ESG rating, an innovative rating that allows the sustainability of companies to be quantified transparently and verifiably. The effective achievements of a company in individual reporting periods are compared and their dynamic development (improved, the same, worse) is scored from 0 to 10. To make it into the selection for the index, a rating of 4.0 or better is essential. The score boundaries are also clearly labelled, giving investors the greatest possible precision in interpretation. GGX also rates companies proactively, without receiving any payment or sponsorship from the company being rated. This, too, underlines the neutrality of GGX’s ESG ratings.
The companies qualifying for the European variant, the GGX Sustainable Dynamic Leaders Europe Index, must have a primary listing in Switzerland, the EU, Great Britain or the other EFTA states (Liechtenstein, Iceland and Norway). The minimum market capitalisation must be one billion euros (or the equivalent). The two sectors of armaments and mining/coal are barred from inclusion in the index. The index members are weighted equally and the net dividend payments are considered in the index performance, favouring investors.
The next step is the qualitative selection. Here the experts at GGX take account of the balance sheet strength, the future prospects and the overall attractiveness for investors. The index as it stands at the moment contains the 20 leading companies based in Europe which have made good progress in terms of sustainability while also representing a sound, attractive investment opportunity. The current selection includes, for instance, the leading wind turbine producer Vestas and the wind and hydro power manufacturer Ørsted, as well as the Mercedes-Benz Group, the Stellantis Group and Porsche Holding, the European driving forces behind e-mobility. ABB, Lonza and SwissRe have likewise qualified for the Sustainable Dynamic Leaders Europe Index. This means investors have the best possible marriage of two elements: ESG performance and financial attractiveness.
A retrospective view of the last five years shows that the GGX Sustainable Dynamic Leaders Europe Index has not only sparkled with an absolute improvement of around 58% in value, but also achieved a significant outperformance by comparison with similarly themed indices (see chart). It is well known that past performance is no guarantee for the future, but the index concept promises to be well suited going forward as well. Investors have an immediate opportunity to include both ecology and the prospect of attractive returns in their portfolio with Switzerland's first ETP+ on a sustainable index. All the information required for purchasing or trading in the listed financial product (symbol ESGEU) can be found here.
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