Deutsche Börse Group

Indices & ESG

To be successful on the capital markets, investors rely on Deutsche Börse Group to provide invaluable research and analytics to ensure that investment decisions are best aligned with investors’ goals. By incorporating environmental, social, and governance (ESG) aspects, as well as risk factors, we provide variety of indices in a transparent and reliable manner that creates trust in the markets. To this end, the following regulatory packages are of particular importance for Deutsche Börse Group:

Benchmark Regulation

The integrity of benchmarks is critical to the pricing of many financial instruments, such as interest rate swaps, commercial and non-commercial contracts, loans and mortgages and risk management. Any risk of manipulation of benchmarks may undermine market confidence, cause significant losses to investors, and distort the real economy.

The Benchmark Regulation was proposed in 2013 in order to restore confidence in benchmarks following LIBOR and EURIBOR scandals. However, the regulation covers a broad range of benchmarks, which differ in their character. Regulated data benchmarks (determined on the basis of input data from regulated venues), for example, are less prone to manipulation compared to interest rate benchmarks.

In 2019, the Benchmark Regulation was reviewed to add two new categories of EU climate transition benchmarks and EU Paris-aligned Benchmarks, as well as sustainability-related disclosures for benchmarks. During 2020, a targeted review of the Benchmark regulation took place, following the UK Financial Conduct Authority (FCA) announcement in 2017 that the London Interbank Offered Rate (LIBOR) will be phased out by the end of 2021. According to the new rules, the European Commission will be able to replace critical benchmarks and other benchmarks with a so-called statutory replacement benchmark, if their termination would lead to a significant disruption in the functioning of financial markets in the EU. In addition, the amended rules extend the transition regime for third-country benchmarks and allow EU supervised entities to use them until the end of 2023.

In 2023, the Commission proposed to review the Benchmark regulation with the aim of reducing administrative and regulatory burden. The proposal reduces the scope of rules applying to third-country benchmarks that are significant for EU markets and removes the risk for EU users of not being able to reference certain benchmarks. To ensure the level playing field benchmarks, scope of rules applying to EU administrators of benchmarks will be reduced ensuring that the regulation applies only to benchmarks deemed as significant and EU climate benchmarks. The review is currently subject to scrutiny by the co-legislators.

For further information on Deutsche Börse Group’s positioning on the matter, find our statements and position papers under Publications.

ESG ratings

Environmental, social and governance (ESG) ratings assess company’s or a financial instrument’s exposure to sustainability risk and its impact on society and the environment. As such, ESG ratings play a crucial role in building investor confidence in sustainable products and a broader operational capacity of capital markets. Addressing the issue of reliability, the Commission initiated a regulatory proposal in 2023 on ESG ratings with the aim of improving transparency and integrity of the operations of ESG ratings providers and preventing potential conflicts of interest.

Under the new regulatory framework, ESG rating providers will need to be authorised and supervised by ESMA and comply with transparency requirements, in particular with regard to their methodology and sources of information. A political deal between the co-legislators has been reached on the final text of the Regulation and its application is pending formal approval procedures by the European Parliament and the Council.

Deutsche Börse Group supports standardisation of ESG ratings and welcomes attempts to increase investor confidence in sustainable products.

For further information on Deutsche Börse Group’s positioning on the matter, find our statements and position papers under Publications.

Further information

ESG benchmarks

Introduction of ESG benchmarks was aimed at standardising and enhancing transparency of benchmark methodologies across the EU to help orient the choice of investors that intend to adopt a climate-conscious investment strategy. In order for a benchmark to be labelled as an EU Climate benchmark, minimum technical standards, such as reduction of carbon emissions year-on-year & large exposure to sectors that highly contribute to climate goals, have to be met.

Following a regulatory initiative by the Commission in 2018, co-legislators have adopted two low carbon benchmarks – EU climate transition benchmarks and EU Paris-aligned benchmarks, that entered into full application in April 2020. Alongside the two benchmarks, the EU adopted sustainability-related disclosure requirements for benchmarks, including disclosure on the alignment with the Paris agreement.

Deutsche Börse Group has welcome introduction of two benchmarks and an increased level of transparency and comparability on the products offered to the public.

For further information on Deutsche Börse Group’s positioning on the matter, find our statements and position papers under Publications.

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