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Examining the Exclusions: SPDR STOXX Europe 600 SRI UCITS ETF

When looking to return to equities after the significant falls this year, many ETF investors have continued to choose an ESG fund for their core equity allocation. SPDR STOXX Europe 600 SRI UCITS ETF tracks the performance of the popular STOXX Europe 600 SRI Index with its broad range of norms- and product-based exclusions and best-in-class ESG scores.

Here we answer some of the most common questions we get from clients on exclusions.

Senior Equity Strategist

Differentiating methodology

The STOXX SRI (Socially Responsible Investing) methodology applies a set of emissions intensity, compliance, involvement and ESG performance screens. 

Stocks are deemed ineligible for inclusion in the index, and thus the SPDR fund, based on three areas:

  • Emissions intensity
  • Sustainalytics' Global Standards Screening assessment
  • Product involvement

In order to integrate best-in-class ESG scoring, the remaining securities are ranked in descending order of their ESG scores within each of the 11 ICB industry groups. The top-ranking securities in each group are selected until the number of securities reaches one third of the number in the parent index.

Selected exclusions by category


1. Why is London Stock Exchange excluded? 

The LSE* is not deemed illegible for inclusion; neither its business of facilitating access to capital markets or corporate behaviour are controversial. However, the stock is excluded because it does not rank high enough in the financials group to be among the top 200 most relatively attractive ESG stocks.

2. Given the SRI credentials, why aren’t all energy stocks excluded?

Looking at the fund under ICB sector classification (which STOXX favours), there are three small energy holdings, including Vestas Wind Energy*. These are all renewable energy companies and do not fall into any of the exclusion categories covering fossil fuels. Interestingly, under the better-known GICS sector classification (used by S&P and MSCI), these stocks would be classified as industrials.

3. What is the difference between SRI and ESG Methodology? 

SRI indices are designed to screen out the highest carbon emitters and track the best ESG performers. This methodology can produce a larger tracking error to benchmarks than equivalent ESG indices, and has led to lower performance in the past 12 months, although with less volatility in terms of realised annualised volatility (standard deviation of daily returns). 

Excluding the likes of Shell* and BP* gives a much stronger case against fossil fuels than alternative ESG methodologies. This has produced heavy underweights to the energy and utilities sectors with a hit to performance in the past 12 months.

4. What is the difference between SRI and climate methodology? 

The STOXX Europe 600 SRI Index methodology cuts total carbon emissions in its index by 80%, a key environmental measure, but it is not necessarily just a climate strategy.

Climate strategies, such as the PAB indices, are also designed to avoid constituents with the highest carbon emissions, aimed at investors who want to decarbonise their portfolios. They have the most popular screens of controversial weapons and tobacco, as well as fossil fuel production and extraction, but their range of exclusions is not as wide as SRI. 

The differences can be seen by the STOXX Europe 600 SRI Index’s lower weighting in manufacturing and utility companies and higher exposure to pharmaceutical and household good producers than a European climate PAB index.

Learn more

To learn more about the SPDR STOXX Europe 600 SRI UCITS ETF, and to view its performance history, please visit its fund page.

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