Nasdaq’s eVestment: Enhancing ESG and D&I Data in Asset Management
The OMX Stockholm 30 ESG Responsible Index (OMXS30ESG), a global pioneer in ESG versions of established exchange benchmarks, was launched in June 2018. This was followed by the introduction of ESG index futures contracts in November of the same year. The OMXS30ESG is an environmentally and socially responsible variant of the OMX Stockholm 30 Index, the primary share index on Nasdaq Stockholm.
The OMXS30ESG is derived from the OMXS30, which includes the 30 most frequently traded securities on Nasdaq Stockholm. These securities undergo a systematic ESG screening, and those that do not meet the criteria are excluded. The OMXS30ESG Index is a market cap weighted index, and its constituents’ liquidity makes it an ideal underlying benchmark for derivatives products.
The OMXS30ESG is also suitable for structured products like warrants, index bonds options, exchange-traded funds, and other non-standardized derivatives products. The OMXS30ESG index composition is reviewed semi-annually, in January and July. In November 2021, Nasdaq expanded its ESG derivative offerings with the listing of options based on the OMXS30ESG Index.
We manage a variety of indexes that incorporate ESG criteria into their methodology. Some indexes are designed purely as ESG, while others use ESG criteria as an overlay to a broader investment thesis. The ISE Cyber Security Index has the largest tracking fund. Other indexes include the OMX Helsinki 25 ESG Responsible Index, the OMX Copenhagen 25 ESG Responsible Index, and the Nasdaq Future Global Sustainability Leaders Index. In 2021, we created ESG versions of two of our flagship indexes, the Nasdaq 100 ESG Index and the Nasdaq Next Generation 100 ESG Index.
In 2021, Nasdaq introduced Green Equity Designations on the Nordic markets in response to the growing demand for sustainable investments and the significant expansion of Nasdaq Sustainable Bond Markets. The Green Equity Designations, which include the Nasdaq Green Equity Designation and the Nasdaq Green Equity Transition Designation, aim to enhance visibility and transparency for investors. These designations are currently available for companies on the Nasdaq Nordic stock exchanges.
As the financial ecosystem anticipates upcoming sustainability and climate-related regulations, Nasdaq may see increasing interest in green equity classification from companies and investors outside the Nasdaq Nordic exchanges. In March 2023, the World Federation of Exchanges (WFE) launched its classification standard for Green Equity with reference to the existing model from Nasdaq’s Green Equity Designation, highlighting the importance of Green Equity Designation in helping investors assess companies that contribute to positive environmental outcomes.
The Nasdaq Sustainable Bond Network, established in late 2019, is a worldwide platform designed to enhance transparency for environmental, social, and sustainable bonds. It serves as a bridge between issuers of sustainable bonds and investors, enabling them to assess impact and make informed decisions on sustainable bonds.
The platform allows sustainable bond issuers to make their data more accessible to investors and other stakeholders. Investors can use the platform to evaluate, track, and create impact reports based on issuers’ ESG bond reporting. The database simplifies sustainable investing with a user-friendly solution that allows investors to discover, compile, and compare sustainable bonds, as well as generate impact reports. The platform also provides issuer-level information on UN Sustainable Development Goals allocation.
In 2022, we introduced functionalities that report on the EU taxonomy alignment of projects financed by issuers’ green and sustainable bonds. We also achieved coverage of more than 1,500 issuers and 14,000 securities globally.
Investors in sustainable bonds are increasingly reporting on the impact of their investments and how their proceeds are allocated. We anticipate this trend to continue, with a larger incorporation of issuer-reported sustainable bond data in investment due diligence.
The Nasdaq Sustainable Bond Network had the following number of issuers and bonds as of December 31:
The OMXS30ESG is derived from the OMXS30, which includes the 30 most frequently traded securities on Nasdaq Stockholm. These securities undergo a systematic ESG screening, and those that do not meet the criteria are excluded. The OMXS30ESG Index is a market cap weighted index, and its constituents’ liquidity makes it an ideal underlying benchmark for derivatives products.
The OMXS30ESG is also suitable for structured products like warrants, index bonds options, exchange-traded funds, and other non-standardized derivatives products. The OMXS30ESG index composition is reviewed semi-annually, in January and July. In November 2021, Nasdaq expanded its ESG derivative offerings with the listing of options based on the OMXS30ESG Index.
We manage a variety of indexes that incorporate ESG criteria into their methodology. Some indexes are designed purely as ESG, while others use ESG criteria as an overlay to a broader investment thesis. The ISE Cyber Security Index has the largest tracking fund. Other indexes include the OMX Helsinki 25 ESG Responsible Index, the OMX Copenhagen 25 ESG Responsible Index, and the Nasdaq Future Global Sustainability Leaders Index. In 2021, we created ESG versions of two of our flagship indexes, the Nasdaq 100 ESG Index and the Nasdaq Next Generation 100 ESG Index.
In 2021, Nasdaq introduced Green Equity Designations on the Nordic markets in response to the growing demand for sustainable investments and the significant expansion of Nasdaq Sustainable Bond Markets. The Green Equity Designations, which include the Nasdaq Green Equity Designation and the Nasdaq Green Equity Transition Designation, aim to enhance visibility and transparency for investors. These designations are currently available for companies on the Nasdaq Nordic stock exchanges.
As the financial ecosystem anticipates upcoming sustainability and climate-related regulations, Nasdaq may see increasing interest in green equity classification from companies and investors outside the Nasdaq Nordic exchanges. In March 2023, the World Federation of Exchanges (WFE) launched its classification standard for Green Equity with reference to the existing model from Nasdaq’s Green Equity Designation, highlighting the importance of Green Equity Designation in helping investors assess companies that contribute to positive environmental outcomes.
The Nasdaq Sustainable Bond Network, established in late 2019, is a worldwide platform designed to enhance transparency for environmental, social, and sustainable bonds. It serves as a bridge between issuers of sustainable bonds and investors, enabling them to assess impact and make informed decisions on sustainable bonds.
The platform allows sustainable bond issuers to make their data more accessible to investors and other stakeholders. Investors can use the platform to evaluate, track, and create impact reports based on issuers’ ESG bond reporting. The database simplifies sustainable investing with a user-friendly solution that allows investors to discover, compile, and compare sustainable bonds, as well as generate impact reports. The platform also provides issuer-level information on UN Sustainable Development Goals allocation.
In 2022, we introduced functionalities that report on the EU taxonomy alignment of projects financed by issuers’ green and sustainable bonds. We also achieved coverage of more than 1,500 issuers and 14,000 securities globally.
Investors in sustainable bonds are increasingly reporting on the impact of their investments and how their proceeds are allocated. We anticipate this trend to continue, with a larger incorporation of issuer-reported sustainable bond data in investment due diligence.
The Nasdaq Sustainable Bond Network had the following number of issuers and bonds as of December 31:
- Issuers: 1,550 in 2022, 1,012 in 2021, and 323 in 2020
- Bonds: 14,222 in 2022, 8,928 in 2021, and 4,600 in 2020
The Nasdaq Sustainable Debt Market consists of dedicated segments for listing green, social, sustainability, and sustainability-linked bonds, structured products, and commercial papers. Our sustainable debt markets are designed to highlight sustainable investment opportunities to investors with a green, social, or sustainable investment agenda. It is open to all types of issuers that are looking to issue securities that meet our listing criteria, which are based on the green and social bond principles as well as the sustainability-linked bond principles, for which the International Capital Markets Association (ICMA) acts as a secretariat.
The number of listings and issuers on the Sustainable Debt Market as of December 31 were as follows:
The number of listings and issuers on the Sustainable Debt Market as of December 31 were as follows:
- Listings: 471 in 2022, 424 in 2021, and 293 in 2020
- Issuers: 129 in 2022, 108 in 2021, and 78 in 2020
Please note that the 2021 and 2020 figures have been restated due to double-counting issuers with debt instruments on several markets and to account for all Nasdaq European exchanges.
In 2022, despite the negative impact of macro-economic factors on the Nordic debt markets, the sustainable debt markets continued to expand, underlining the growing significance of sustainability in the financial markets. The number of sustainable debt instruments listed on Nasdaq increased by 11% during 2022, and the volume of listed bonds grew by 27%. This growth was primarily driven by new, large issuers joining the market, such as the inaugural Danish sovereign green bond listed on Nasdaq Copenhagen, as well as a broader adoption of sustainability-linked bonds in the Nordic region. Sustainability-linked bonds enable issuers that lack large capex but have set ambitious sustainability targets to join the broader sustainable debt markets, potentially driving the overall markets’ growth in the future by allowing new sectors to participate.
ESG Data Hub is a data solution that provides investors and other stakeholders with easy access to a broad range of comprehensive ESG data sets, complete with detailed product descriptions, selling points, and use cases. The platform allows users to find data sets relevant to specific UN Sustainable Development Goals (SDGs), providing investors with visibility on the ESG impacts of their investments. The demand for the data is driven by a shift away from broad ratings towards understanding the different aspects of ESG in granular detail. This trend towards granular data sets began in 2022 and continues to be a growing segment. In 2022, we added several new data sets to the product from third-party providers and also added our sustainable bond network data to the platform. For 2023, we continue to seek unique data partners to add to the solution, based on feedback and the needs of customers. We plan to integrate ESG data into our broader data marketplace, Nasdaq DataLink.
ESG Footprint is a user-friendly platform that measures the global sustainability impact of a portfolio and individual securities. Through an intuitive dashboard, investors and managers can access the real-life effects of each investment, along with alternatives that may better align with an individual’s sustainability goals. The tool provides investors with insight into positive and negative flags for companies within their holdings, depending on criteria set by the customer.
We have seen growing demand for regulatory solutions, particularly SFDR and EU Taxonomy. Within ESG Footprint, there are multiple datasets that provide insight into the core impact of business and investment opportunities on SDGs. These datasets (SDG Signals, SDG Fundamentals, SDG CAPX) allow investors to evaluate companies’ alignment against the SDG framework. In 2022, we added functionality that helps customers meet their SFDR requirements. In addition, we launched the product with a group of 20 banks in Denmark that are providing SFDR overlays for all their retail customers. In 2023, we continue to invest in the product and are looking to add an EU Taxonomy overlay while continually improving data quality.
Nasdaq offers a variety of products and services that incorporate select ESG features. One such service is eVestment, a leading institutional investment database and analytics platform acquired by Nasdaq in 2017. In response to the growing demand for transparent and standardized D&I and ESG data from institutional stakeholders, eVestment has launched several initiatives to provide a centralized resource in collaboration with consultants, asset managers, asset owners, and key industry organizations. We work closely with key industry partners to enhance the platform’s data breadth.
In terms of D&I data, eVestment started collecting this data in collaboration with the Institutional Investing Diversity Cooperative (IIDC) in 2021. The D&I questionnaire allows asset managers to provide narrative commentary on their firms’ D&I initiatives and statistics. In 2022, in partnership with FCLTGlobal and the Institutional Limited Partners Association (ILPA), eVestment created a new diversity metrics template and data collection capabilities for its private markets reporting solutions. The data includes information on diversity metrics for investment company firm ownership, investment committee members, and investment professionals, as well as aggregated diversity metrics for board and senior management of a fund’s portfolio companies.
As for ESG data, eVestment launched an ESG questionnaire in 2020 to facilitate robust investment research, providing an opportunity for asset managers to articulate their approach to ESG with compelling proof points. In 2022, the questionnaire was expanded with major enhancements to the proxy voting and engagement data designed to better understand process and outcome, add more questions around alignment (SDGs and SFDR) as well as introduce new climate sections at both the firm and the product level. To date, more than 50% of active products on eVestment are providing responses to the ESG questionnaire, while about 45% of firms are providing firm-level information. Usage of eVestment’s ESG data has tripled since the 2020 questionnaire rewrite, reflecting not only the increased value of the data, but the increased importance of ESG data in the investing landscape.
In 2022, despite the negative impact of macro-economic factors on the Nordic debt markets, the sustainable debt markets continued to expand, underlining the growing significance of sustainability in the financial markets. The number of sustainable debt instruments listed on Nasdaq increased by 11% during 2022, and the volume of listed bonds grew by 27%. This growth was primarily driven by new, large issuers joining the market, such as the inaugural Danish sovereign green bond listed on Nasdaq Copenhagen, as well as a broader adoption of sustainability-linked bonds in the Nordic region. Sustainability-linked bonds enable issuers that lack large capex but have set ambitious sustainability targets to join the broader sustainable debt markets, potentially driving the overall markets’ growth in the future by allowing new sectors to participate.
ESG Data Hub is a data solution that provides investors and other stakeholders with easy access to a broad range of comprehensive ESG data sets, complete with detailed product descriptions, selling points, and use cases. The platform allows users to find data sets relevant to specific UN Sustainable Development Goals (SDGs), providing investors with visibility on the ESG impacts of their investments. The demand for the data is driven by a shift away from broad ratings towards understanding the different aspects of ESG in granular detail. This trend towards granular data sets began in 2022 and continues to be a growing segment. In 2022, we added several new data sets to the product from third-party providers and also added our sustainable bond network data to the platform. For 2023, we continue to seek unique data partners to add to the solution, based on feedback and the needs of customers. We plan to integrate ESG data into our broader data marketplace, Nasdaq DataLink.
ESG Footprint is a user-friendly platform that measures the global sustainability impact of a portfolio and individual securities. Through an intuitive dashboard, investors and managers can access the real-life effects of each investment, along with alternatives that may better align with an individual’s sustainability goals. The tool provides investors with insight into positive and negative flags for companies within their holdings, depending on criteria set by the customer.
We have seen growing demand for regulatory solutions, particularly SFDR and EU Taxonomy. Within ESG Footprint, there are multiple datasets that provide insight into the core impact of business and investment opportunities on SDGs. These datasets (SDG Signals, SDG Fundamentals, SDG CAPX) allow investors to evaluate companies’ alignment against the SDG framework. In 2022, we added functionality that helps customers meet their SFDR requirements. In addition, we launched the product with a group of 20 banks in Denmark that are providing SFDR overlays for all their retail customers. In 2023, we continue to invest in the product and are looking to add an EU Taxonomy overlay while continually improving data quality.
Nasdaq offers a variety of products and services that incorporate select ESG features. One such service is eVestment, a leading institutional investment database and analytics platform acquired by Nasdaq in 2017. In response to the growing demand for transparent and standardized D&I and ESG data from institutional stakeholders, eVestment has launched several initiatives to provide a centralized resource in collaboration with consultants, asset managers, asset owners, and key industry organizations. We work closely with key industry partners to enhance the platform’s data breadth.
In terms of D&I data, eVestment started collecting this data in collaboration with the Institutional Investing Diversity Cooperative (IIDC) in 2021. The D&I questionnaire allows asset managers to provide narrative commentary on their firms’ D&I initiatives and statistics. In 2022, in partnership with FCLTGlobal and the Institutional Limited Partners Association (ILPA), eVestment created a new diversity metrics template and data collection capabilities for its private markets reporting solutions. The data includes information on diversity metrics for investment company firm ownership, investment committee members, and investment professionals, as well as aggregated diversity metrics for board and senior management of a fund’s portfolio companies.
As for ESG data, eVestment launched an ESG questionnaire in 2020 to facilitate robust investment research, providing an opportunity for asset managers to articulate their approach to ESG with compelling proof points. In 2022, the questionnaire was expanded with major enhancements to the proxy voting and engagement data designed to better understand process and outcome, add more questions around alignment (SDGs and SFDR) as well as introduce new climate sections at both the firm and the product level. To date, more than 50% of active products on eVestment are providing responses to the ESG questionnaire, while about 45% of firms are providing firm-level information. Usage of eVestment’s ESG data has tripled since the 2020 questionnaire rewrite, reflecting not only the increased value of the data, but the increased importance of ESG data in the investing landscape.
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