« Just transition » makes inroads in Eastern Europe
More and more savers in Eastern European countries are investing in structured products with the “Environmental, Social and Governance” (ESG) "Solactive Just transition” index as an underlying. Launched by Societe Generale in partnership with Solactive and Vigeo-Eiris, this index offers exposure to the social dimension of ESG through the theme of "just transition" to a low-carbon economy.
Well-being at work, health, employee safety and engagement are among the priorities of companies. They are also changing their production and consumption patterns or restructuring their operations to make them more sustainable and inclusive. In this context, investing takes on a social dimension, wherever possible.
Investors are now looking for high-performing products that incorporate this "S" of ESG. They are particularly interested in indices such as the Solactive Just Transition index that was launched by Societe Generale in partnership with the index provider Solactive and the responsible investment research company Vigeo-Eiris. This index is used as a financial performance driver for tailored investment solutions such as structured products. After applying various filters, both qualitative and quantitative, it offers clients exposure to a selection of European companies that are best prepared to support a "just transition" to a low-carbon economy. This selection takes into account, among other things, their ability to deal with the risks associated to climate transition related changes to their activities (job cuts or transformations, potential disinvestments in local communities, etc.) and their good practices in terms of career development, management of social factors in the supply chain, responsible management of restructurings and respect for human rights standards.
"Retail clients from both Societe Generale’s networks and external distribution networks in the Czech Republic, Romania, Poland and Hungary, have only converted to ESG two years ago. In their eyes, every ESG criterion, whether it's the 'E', the 'S' or the 'G', is important. They have been very fast to catch-up and are now buying tailormade structured products that have our ESG indices as their underlyings. The demand for products that use the Solactive Just transition index as a performance driver comes mainly from clients in the Czech Republic and Romania. The energy transition and its social dimension are investment themes that interest them because they are strong, and now unavoidable, strategic development areas for all companies", explains Maxime Piel, Structured Products Sales for Central and Eastern Europe within Societe Generale's market activities.
“This index offers a unique exposure to the world of ESG. The low-carbon transition is part of the sustainable development effort and its combination with social aspects is particularly attractive for our clients. Human capital is key for future growth in a post-covid world. It is also an excellent vector for performance”, explains Pavel Fojtik, banker in charge of the distribution of financial savings products within the Czech bank Československá obchodní banka (CSOB).
The financial characteristics of the index and the interest rate environment in Eastern European countries also fuelled client appetite. "Low volatility and lump sum dividends are important features of the Solactive Just transition index. In the current context of high interest rates in the Czech Republic (1.8% at 5 years) and Romania (2% at 5 years), they allow clients to benefit from an attractive solution based on this index, adds Maxime Piel. Structured products are a combination of a zero-coupon bond (bought at a discount and redeeming 100% at maturity) and an option. As the price of a bond moves in the opposite direction to the interest rates, the higher the interest rates, the lower the value of the zero-coupon bond and therefore offers clients an attractive solution via the purchase of the option."
The Solactive Just transition index completes the range of ESG indices offered by Societe Generale, which has also launched the Solactive Employee Well Being index, another index on the social factor which focuses on the theme of employee safety, well-being, and health.