ICE has a future in global warming

Darren Sinden

ICE or the Intercontinental Exchange has announced a further addition to its product range with the launch of no less than 10 new futures contracts which will be based on MSCI indices. The new contracts are part of the exchange’s expansion into ESG and climate-related products. ICE, of course, has long been associated with energy […]

Factory Europe

ICE or the Intercontinental Exchange has announced a further addition to its product range with the launch of no less than 10 new futures contracts which will be based on MSCI indices.

The new contracts are part of the exchange’s expansion into ESG and climate-related products. ICE, of course, has long been associated with energy products such as the widely traded IPE Brent crude oil contract.

Four of the futures contracts are designed to offer a way for market participants to understand and interact with the opportunities and risks associated with climate change and the transition towards a low carbon economy.

These are the MSCI World Low Carbon Leaders NTR Index Future (contract symbol WLC). The MSCI World Low Carbon Target NTR Index Future (contract symbol WLT) which are being launched alongside the MSCI Europe Climate Change NTR Index Future (contract symbol EU1) and the MSCI World Climate Change NTR Index Future (contract symbol WOW).

Its hoped that these low carbon and climate change-related derivatives will complement and enhance ICE’s existing suite of MSCI ESG based futures.

In addition, there are a further 6 new contracts based on MSCI indices with a country-specific or regional equity focus in the Asia Pacific region.

The new contracts details are as follows the MSCI Kokusai GTR Index (contract symbol KKS), the MSCI Australia NTR Index (contract symbol AS7), the MSCI Malaysia NTR Index (contract symbol MYY), the MSCI Thailand NTR Index (contract symbol THG) and the MSCI Hong Kong NTR Index (contract symbol HKX).

These contracts follow on from the November launch of futures on the MSCI Emerging Markets ex-China NTR Index, which captures equity performance in 25 out of 26 of MSCI’s Emerging Markets.

The end of 2020 has certainly been a busy period for ICE and its indexing partners speaking about the new launches Caterina Caramaschi, Global Head of Equity Derivatives at ICE said that: “ICE is the leading venue for MSCI Index Futures and lists more than 100 futures contracts,” adding that
“ICE remains committed to providing market participants with tools to benchmark and effectively manage equity risk across various geographic-specific and ESG-related index futures.”

George Harrington, Global Head of Futures and Options Licensing at MSCI, said: “As the world’s largest provider of ESG indexes, we have witnessed fast adoption of climate indexes over the past 18 months as institutional investors look to position themselves for transition to a low-carbon economy.” He further committed that “We are pleased to expand our relationship with ICE as investors around the world look to capture climate change risks and opportunities across the investment process.”

MSCI is, of course, one of the leading creators of indices worldwide with more than a trillion dollars benchmarked against their equity index products and while their ESG ranking and rating products are widely used and respected, they are just one of more than 100 separate systems for categorising investments on sustainability and social factors. Though MSCI can claim to be in the vanguard as ETFs on its ESG indices have attracted $71.0 billion as of the end of November 2020 according to research by ETF Stream.

The challenge for ICE and MSCI will be in making their ESG and climate change-related products stand out from the crowd and whilst it’s good to offer end-users product choice I can’t help but think of designer and architect Mies van der Rohe’s famous quote that sometimes less is more.

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