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Introduction
In the second chapter of the latest SRP Index report, we delve into the growing role of thematic and ESG (Environmental, Social, and Governance) indices within the structured products market.
These indices have become key focal points for both product innovation and investor demand, offering unique opportunities to gain exposure to companies aligned with specific structural themes, trends, and societal shifts.
As ESG investing gains mainstream traction, product providers are under increasing pressure to meet the growing demand for transparent ESG data and regulatory frameworks that enhance comparability and accountability.
While the market has faced challenges due to external factors such as the ongoing energy crisis and geopolitical tensions like the war in Ukraine, the continued growth of sustainable investment funds targeting ESG themes has the potential to significantly contribute to achieving the United Nations’ Sustainable Development Goals (SDGs) established in 2015.
As ESG regulations–such as the EU Taxonomy, SFDR disclosures, and MIFID II amendments– evolve there is a heightened emphasis on ensuring that the ESG factors integrated into structured products meet the diverse expectations of investors, both in terms of transparency and alignment with their values.
This report provides an in-depth analysis of the latest developments in thematic and ESG indices, including insights from leading index providers and ESG product manufacturers active in the retail structured products market. It also features an update on key regulatory shifts, an overview of market trends, and a breakdown of issuance and sales data by region, strategy type, and ESG sub-themes.
A significant focus of this chapter is the integration of decrement and risk control overlays in ESG and thematic indices.
reports uses sources believed to be reliable. SRP assumes no liability or responsibility for the quality, content, accuracy or completeness of the information, text, graphics, links and any other items contained on this report.
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ESG indices
Since the high of 2022,
Some 289 unique ESG indices were registered on the SRP global database between 2022-2024. They were used to underly 6,400 products worth an estimated US$44 billion in the period.
Sales volumes for products linked to a single ESG index decreased by almost 20% in the past three years. The decline was most visible in 2023 when volumes dropped to US$12.8 billion (from US$17.1 billion the previous year) –down 25% year-on-year (YoY) – before slightly recovering to US$13.9 billion in 2024.
Issuance followed a similar pattern, peaking at around 2,800 products in 2022. It fell to 1,750 the following year before showing signs of recovery in 2024, when around 1,875
publicly offered products linked to a single ESG index were issued – still almost 1,000 less than in 2022.
The market share for ESG indices out of the total indexlinked offer by sales volume reached 11% in 2024, up from 9% the previous year but down compared to 12% in 2022. The ESG market share out of the total structured products offering stood at 1.0% in 2024 versus 1.3% in 2023 and 1.7% in 2022, according to SRP data.
Europe, Middle East & Africa (Emea) continued to lead the way. In 2024, more than 99% of all volumes invested in ESG-index linked products was issued in the region, predominately in Europe, compared to 97.5% in 2023 and 96.4% in 2022.
Whereas Emea has seen constant high volumes, ESG indexlinked issuance in the Americas and Asia-Pacific remains at a low ebb. The Americas registered estimated volumes of US$40m in 2024, down by more than 80% YoY and a decrease of 90% compared to 2022. In Apac, sales were also the highest in 2022, when US$140m was linked to structures on a single ESG index. Since then, volumes drastically reduced ending up at a meagre US$43m in 2024.
Geographic exposure focused on Europe, global and transatlantic (Europe & US), which were responsible for almost all sales in the period, with North America and Apac almost non-existent.
Exposure to Europe reached 62% in 2024, up from 55% the previous year while global exposure remained stable at around 20%. Transatlantic indices, which first started to gain traction in 2020 captured 18% market share in 2024, down two percentage points YoY but level compared to 2022.
Most index providers offer indices with ‘transatlantic’ exposure these days which is reflected on the SRP
Types of ESG
database with 42 such indices used in the period under review including the iStoxx Transatlantic Megatrends ESG 60 GR Decrement 50 Index, iEdge ESG Transatlantic EW 50 Decrement 50 Points GTR Index, Euronext Transatlantic Sustainability and Climate Screened Decrement 50 Index, S&P Transatlantic 100 ESG Select Equal Weight 5% Decrement Index, MSCI Transatlantic Select Green 50 5% Decrement Gross Index, Morningstar Transatlantic Auto Banks Lux Tech Tel ESG 60 Decrement 50 GR Index and Solactive Transatlantic Biodiversity Screened 150 CW Decrement 50 Index.
The majority of ESG indices has a decrement in percentage feature, averaging 61% over the period and remaining at constant levels.
ESG indices with decrement in points feature averaged 19% market share but dropped to 15% in 2024 – down six percentage points YoY. On the other hand, market share for ESG indices with no decrement (18% average), which reached 17% and 15% in 2022 and 2023, respectively, increased by six percentage points to capture 21% in 2024.
Thematics
Risk control indices, which held three percent in 2022 and one percent the following year, did not get any traction in 2024 while exposure to ESG decrement in percentage indices with a risk control element was nihil.
Broad ESG-screened indices were the main thematic in the period, averaging 46% market share, ahead of climatefocused/Paris-aligned benchmarks (PAB) and thematic ESG, which each averaged 27%. The former increased its market share to 54% in 2024, up from 39% the previous year.
Breaking down ESG indices into sub-thematics, broad ESG captured almost half of the market between 2022-2024 (46% average), peaking at 54% in 2024. Climate-focused and PAB averaged 15% and 12%, respectively, ahead of sustainable development goals (SDG) at nine percent.
Other thematics that gained traction during the period included environmental sustainability, water & ocean, energy transition, health care and biodiversity, among others.
Index providers
MSCI was the number one provider for ESG indices during 2022-2024, averaging 31% market share over the period. The company’s main index – both by issuance and sales volume – was the MSCI World Climate Change ESG Select 4.5% Decrement EUR Index, which collected an estimated US$5 billion from 2,535 products that were almost exclusively issued in Germany via DekaBank.
Other prominent MSCI indices included the MSCI France Select ESG 30 3.75% Decrement Net Index, which gathered US$1.4 billion from 17 products issued by Crédit Agricole in France, and the MSCI World SRI Sustainable Select 3.5% Decrement Index, another index popular in Germany – seen in 300 products, this time issued via DZ Bank (US$465m).
The Euro Stoxx 50 ESG Index and Euro Stoxx 50 ESG-X Index were the main ESG indices from STOXX, which averaged 24% market share. Products linked to former were available across 11 different jurisdictions and sold an estimated US$2.4 billion while the bulk of the volumes invested in the Euro Stoxx 50 ESG-X Index came from investors in France (US$1.5 billion).
S&P Dow Jones Indices (14% average) had 11 active ESG indices in the period. Of these, the highest demand came for the S&P EuroUSAJapan 100 Net Zero 2050 ParisAligned Select 5% Decrement Index (US$760m from 27 products) followed by the S&P 500 ESG Index (US$460m from 184 products).
SGX’s best-selling index was the iEdge ESG Transatlantic SDG 50 EW Decrement 5% NTR Index which collected an estimated US$1.3 billion from 28 products issued by Natixis in France while Euronext, which completed the top five, had seven indices available, including the Euronext Eurozone 60 PAB Index, SOCOEUR Euronext V.E Eurozone Social Focus Decrement 5% Index and Euronext Eurozone Energy Transition Leaders 50 EW Decrement 5% Index.
Euronext averaged 11% market share between 2022-2024. The company’s main index was the SBF Top 50 ESG EW Decrement 50 Points which gathered an estimated €1.2 billion from 120 products that were all issued on the paper of SG Issuer in the period. Other Euronext indices that performed well included the Euronext CDP Environment France EW Decrement 5% Index (US$325m from four products) and the Euronext France Social Decrement 3.75% Index (US$285m from five products). Solactive (four percent average) had 26 active ESG indices during the period. Of these, the highest volumes were gathered by products linked to the Solactive Transatlantic Biodiversity Screened 150 CW Decrement 50 Index (US$690m).
Non-ESG components and minimum thresholds
Thomas Wulf: The current broader technical challenge is that under MIFID rules products can be sold as sustainable whose components only have a low level of taxonomy equivalence, as long as this low contribution is clearly (number-wise) being disclosed. Investors raise the fair question whether this actually what they had in mind when investing “sustainably”. The problem lies with the lawmakers who forgot or shied away from linking the MIFID quantification criteria to SFDR categories.
EUSIPA is in this context calling for clear rules on integrating quantitative information with existing qualitative standards as otherwise there is an absence of transparency and the danger of having rather superficial ESG labelling of financial products.
Integrating ESG figures into marketing materials and retail investment strategy
Thomas Wulf: Another challenge around ESG is the difficulty of incorporating any ESG numbers into Key Information Document (KID). The three-page limit for KID creates technical constraints and further uncertainty about how to present ESG metrics effectively.
We will finally have to wait and see how the pending SFDR recast, the first results of which are supposed to come in by Q3 2025, will impact the representation of ESG information including any potential changes that may be required future KID modifications –some of these issues are likely to be addressed by the Retail Investment Strategy (RIS) whose destiny however is again unclear at the moment.
The financial industry by and large would support an approach to include providing a summary of ESG aspects in the Priips KID prioritising clear, quantitative ESG information, and prominently display percentage of taxonomy equivalents with a focus on transparency over complex labelling.
Our focus remains on investor communication providing clear, understandable ESG metrics while standardising ESG reporting across financial products to enable investors to make informed decisions and compare products.
Industry adoption and challenges
Thomas Wulf: The industry is hesitant to implement changes without clear regulatory requirements and will not take proactive steps unless explicitly required. Past experiences of regulatory shifts have made stakeholders very cautious as some previous implementation efforts finally did not become applicable law. In general it is fair to say that the ongoing debates about methodology and thresholds are being governed by national-market focused tendencies which, as always, are often complicating a unified approach. In addition, political complexities of the new framework (in terms of which dimension supersedes the other when looking at labels, MIFID and SFDR categories) have exposed the difficulty in creating a standardised approach across different markets.
Future of ESG in the regulatory agenda
Thomas Wulf: With the current geopolitical backdrop, the Polish presidency which started in January is understandably prioritising security over anything else due to Russia-Ukraine conflict. Year to date we have seen that defence will take precedence over ESG stand-alone initiatives with a number of voices calling for the potential inclusion of the defence industry in ESG-eligible pool of companies.
The ESG regulatory agenda is expected to be less prominent in the short term, with a focus on security and resilience, while background work on refining ESG frameworks and methodologies is being continued, also given that the climate challenge will not go away.
ESG within Eusipa’s agenda
Thomas Wulf: ESG remains a strategic focus area for Eusipa which is seeking regulatory coherence between SFDR and MiFID regimes. We want a consistent methodology for quantitative ESG disclosure and evaluating national sustainability labels.
The industry wants reassurance from regulators on whether derivatives enhance ESG ambitions as well as a consistent treatment across both product- and balance sheet level. Our operational approach currently is cautious, focused on creating a consistent, transparent framework for ESG integration while navigating complex national regulatory environments. ENDS
good time to address some of the existing issues and prepare the market for a potential future increase of ESG product demand.
While macro and geopolitical dynamics are currently suppressing ESG activity, the fundamental interest remains, and the market expects a potential revival once immediate economic and security concerns diminish.
Outstanding ESG regulatory considerations and SFDR
Patrick Scholl: There is concern across the industry about the undefined and unclear way forward in the European Union, especially with the Polish Presidency focusing on security issues.
With regulatory uncertainty, ESG is facing an unclear path going forward. The lack of clear political perspective on ESG market regulation and the ongoing debate between productspecific versus behaviour regulation is also slowing down adoption.
The SFDR regime is also facing a potential slowdown as the Polish Presidency has prioritised security over ESG due to the proximity of the Ukraine war.
We believe that regulators should focus on creating an overall market framework with a comprehensive approach that prioritises transparency and comparability and develops standards aligned with actual products sold in the market.
The new regulatory should encompass prospectus requirements as well as Key Information Documents (KID) and distribution guidelines, and develop a standardised approach, potentially using a “traffic light” system.
The European structured products industry is also well positioned to remain an ESG front-runner and promote voluntary disclosure templates and other market selfregulation providing market players guidance and reducing greenwashing risks. It is important that any kind of EU ESG regulation enables innovation and not results in the markets moving away from ESG products.
Needless to say that this also applies to ESMA’s intention to avoid greenwashing. This is generally an important angle of the ESG regulation and supervision, but it is also important that a general rule of assumption that market players generally tend towards a general greenwashing is being
emphasised which could disincentivize market players on structuring ESG products.
Investor concerns, simplifying regulations
Patrick Scholl: Regulation should take into consideration client perspectives on ESG. Investors understand ESG is complex and important and want to be prepared for future ESG developments. Despite the current environment the underlying interest remains.
The industry is lobbying for regulatory simplification and the need for an overarching regulatory framework as opposed to a siloed approach via different regimes. The industry is asking for a comprehensive and consistent approach across different regulations with a focus on transparency, comparability and practical market applicability.
The current set up is confusing with multiple overlapping regulations - MiFID, SFDR, CSRD, Taxonomy Regulation, European Green Bond Regulation, ESG Benchmark Regulation. PRIIPS and the connected Prospectus Regulations. That is why the industry wants to develop a holistic view of market regulation and create standards aligned with actual market products. The industry wants to streamline and simplify the regulatory landscape and avoid creating guidelines that are disconnected from market realities.
This would help to potentially simplify the strategies brought to market and create clear, standardised ESG product definitions.
Challenges, future of ESG
Patrick Scholl: The conversation suggests that while current challenges exist, the long-term potential for ESG adoption remains strong, with a need for clear standards, regulatory clarity, and market-driven innovation.
On top of voluntary disclosure and template refinements the industry is exploring the use of derivatives at a larger scale to support the green transition as well as creating risk protection elements and capital benefits for banks.
Despite the lack of clarity, the market has shown its selfregulation potential by deploying capital and efforts to create standardised codes of conduct. Industry-led initiatives like the ESG Code of Conduct in Germany are gaining importance.
“You cannot have the wrapper that is completely disadvantaged to the ESG idea. On the other hand, it’s not merely a green bond,” said Scholl, who sees the necessity of combining both the wrapper and derivatives portion when examining ESG elements from a lawyer’s perspective.
“The question about what product can be distributed on an ESG label in what jurisdiction must be harmonised immediately in order to save this product,” he said.
Scholl added that there is more activation in the European Union (the EU) with the omnibus packages towards less regulation in the ESG area – while the EU’s ‘regulate first and then test after’ approach towards ESG may need a rethink, the senior lawyer added.
“We currently see a very cautious approach towards the distribution of ESG products… I think it is really important that we clean up the regulatory landscape for them and make distribution for these ESG products,” he said.
Antonia Lim, chief investment officer at Impact Cubed, noted that ESG is “a collection of hundreds of things that could each have an impact on the success of your investment” and highlighted the importance of transparency and customisation in the ESG space.
“We’re seeing real pressure from EU and UK regulators to have third-party and independent verification. To have that, you want to have that look through,” she said.
Lim, a quantitative research veteran with a sell-side background, sees that the tangible numbers speak more volumes through portfolio construction compared to ratings.
One example she gave was the research on diversity, equity, and inclusion (DEI) her team has started looking into via data digging rather than ratings.
“People understand, if you go, what are the percentage of women on board? What are the percentage of women in management? What are the percentage of women and many other aspects of DEIs – it’s that real thing that you put in a portfolio,” she said.
“The one size fits all doesn’t [work]. We’re doing a lot of customisation that’s across the whole investment process, from customer indices to custom reporting to digging in through it in a customised way,” she added.
Sector plus ESG?
While the luxury sector was among the overarching themes in last year’s conversations, this year the aerospace and defense sectors have sparked interest and demand – “and some debates among structured products and ETF issuers”, according to STOXX’s Loeb.
“It’s an interesting one because typically, there are a lot of companies in this sector which are excluded from ESG indices [screening],” she said, adding there’s still a scope for deepening this sector with a potential ESG element in play.
“You could think about a sustainable defense index and maybe weight the companies looking at their revenue coming from defense and controversial weapons… There are ways of making an ESG friendly aerospace and defense index, and we are working on it,” she said.
Impact Cubed’s Lim said that in its recent soft survey of 70 large asset owners, biodiversity ranked at the top of the preferences of product providers, alongside climate and water.
As the artificial intelligence (AI) theme continues to spur industry and potential product innovation, Lim embraced the idea of continuing to put data and figures to good use.
Decrement indices
The decrement overlay is constructed by periodically deducting a fixed percentage or index points from the underlying index.
Decrement or synthetic dividend overlays used in indices underlying structured products continue to grow and increase their market share across markets.
The first decrement index seen on SRP’s database was the Euro iStoxx Equal Weight Constant (ECW) 50 Index, which replicates the Eurostoxx 50 Equal Weight Index while assuming a constant dividend of 50 points per year. The index was used as the underlying for Objectif Février 2015, which was issued by Société Générale in France during February 2015.
Since then, many more products followed with more than 31,600 products linked to a decrement index listed on the SRP database, including some 23,275 that are currently still live (as of 25 April 2025).
It comes as no surprise that France is the main market for decrement indices for the period under review (2022-2024), with an estimated US$48.2 billion invested in over 5,600 products, followed by Canada, Germany, and – to a lesser extend – Italy and the US.
SRP data
Some US$29.7 billion was invested in structured products linked to a single decrement index in 2024 – an increase of 11% year-on-year (YoY) and up 17% compared to 2022. Issuance in 2024, at 6,870 products, increased by seven and 14%, respectively, compared to 2023 (6,412 products) and 2022 (6,042).
There are four main types of decrement indices: percentagebased decrement indices (with and without volatility control), points-based decrement indices and single stock decrement indices.
Of these, percentage-based decrement indices achieved a 40% market share out of the total decrement universe in 2024, slightly ahead of points-based decrement indices which gathered 38%. The former increased its market share by four percentage points YoY but was down 16 percentage points compared to 2022 while points-based decrement lost 15 percentage points compared to 2023 and three percentage points compared to 2022.
The market share for percentage-based decrement indices with volatility control feature remained low over the period, despite increasing to two percent in 2024. Single stock decrement indices, however, significantly increased their market share: from three percent in 2022 to 11% in 2023 before registering 20% in 2024.
Europe, Middle East and Africa (Emea) has always been the
dominant region for decrement indices. Some US$25.5 billion was invested in decrement indices in Emea in 2024, the equivalent of 86% of the total decrement market and up 14 percentage points YoY.
In the Americas, where decrement indices also had been making inroads – with the region increasing its market share from 0.2% in 2019 to 28% in 2023 – there was a steep decline last year with only US$4.2 billion invested in 2024 (14% market share).
Asia Pacific is the only region where decrement indices remain almost non-existent with a mere US$6.6m invested in 2024.
In Emea, products linked to percentage-based decrement indices sold an estimated U$11.8 billion in 2024, ahead of points-based decrement and single stock decrement indices (US$7.8 billion and US$5.8 billion, respectively).
Points-based decrement indices dominated the Americas with estimated sales of US$3.3 billion in 2024.
Annual sales evolution (US$m) per region of offering
STOXX averaged a market share of 14% with a peak in 2022 when it reached 19%. Products linked to the company’s decrement indices were available across 13 different jurisdictions between 2022 and 2024, with an estimated US$11.7 billion collected during the period.
France, where it sold US$7.3 billion from 970 products, was the main market for STOXX decrement indices with the Euro iStoxx Equal Weight Constant 50, Euro iStoxx Banks GR Decrement 50 Series 2 Index, Euro iStoxx 70 Equal Weight Decrement 5% and iStoxx Europe 600 Basic Resources GR Decrement 50 Index all gathering large volumes.
In Italy, an estimated US$3 billion was collected from 75 products including US$765m invested in products linked to the Euro iStoxx 50 Artificial Intelligence Tilted NR Decrement 5% Index and US$600m in products that offered access to the Euro iStoxx 50 Future Healthcare Tilted NR Decrement 5% EUR Index.
Other markets where STOXX decrement indices had significant activity included Germany, where US$880m was invested in 530 products linked to the idDAX 50 ESG NR
Decrement 4% PR EUR Index and a further US$25m was tied in 40 products on the idDAX 30 ESG Decrement 4.0% Index.
SGX is the calculator and publisher for the iEdge indices, which are licensed to Natixis. The company steadily increased its market share over the period (2022: 6%; 2023: 11%) before peaking at 15% in 2024. Its flagship index is the iEdge ESG Transatlantic SDG 50 EW Decrement 5% NTR Index which was linked to 28 products that sold a combined US$1.3 billion.
The market share for S&P Dow Jones Indices remained relatively stable at around 11%. It was active in 16 markets between 2022-2024, but mostly in France and the US. In the former, it collected US$6.8 billion from 634 products that included structures linked to the S&P Eurozone LargeMidCap Banks (Industry Group) 50 Point Decrement EUR TR Index and S&P Europe LargeMidCap Energy (Industry Group) 50 Point Decrement EUR TR Index.
In the US it gathered US$1 billion from 470 products with more than half of the volumes invested in products linked to the S&P U.S. Equity Momentum 40% VT 4% Decrement Index (US$630m).
Decrement single stocks and static baskets: market share (out of the decrement index universe) by sales volumes
MSCI: investor appetite for specialised, targeted investments is increasing
MSCI has used its ESG and thematic research capabilities and the use of overlays to carve its corner in the structured products market where its flagship benchmark, the MSCI World Index, is not its most featured index.
According to Stephane Mattatia, global head of thematic indexes and derivatives licensing at MSCI, current hot topics in thematic investing include artificial intelligence and European sovereignty, but also the defence sector, economic exposure strategies and smart defence against tariffs.
“Geopolitical-driven investment themes are also gaining traction among investors with some product providers already enquiring about domestic company focus as well as tariff-related economic indexes,” said Mattatia.
“Thematic indexes are becoming more popular because they offer quick adaptation to market needs and instead of replacing market cap indexes, they offer complementary strategies.”
Many of these new thematic indexes have been enabled by advanced data analysis (big data, large language models) and have shorter lifecycle compared to traditional approaches - over the last few years some themes have driven market activity as we saw in 2022 with the Metaverse or in 2023 with energy stocks.
Last year was about AI and luxury goods and so far, this year the potential upcoming winners include gold, defence stocks, and private equity.
“Thematic investing remains a complementary part of an overall investment strategy, given the continuous rotation nature of investment themes,” said Mattatia. “Market cap indexes will continue to dominate but there is clearly increasing investor appetite for specialised, targeted investments.
“Providers that can deliver responsive indices that capture emerging market opportunities will have an edge in the market.”
Overlays - Evolution
Looking at the use of index overlays to optimise underlyings for structured products Mattatia noted “a change in dynamics over the last few years”.
“Previously the focus was on introducing new strategies and indices with overlays (risk control, decrement) whereas the current trend is on adding overlays to traditional highly liquid market cap indices,” he said.
MSCI: top indices by sales volume
“The use of overlay types such as decrement strategies and intraday risk control can provide more flexible investment options and address market uncertainty.”
This kind of features can also be used to simplify complex investment strategies and help investors understand risk data.
“With increasing market volatility there is room for overlays and defensive strategies as investors have a desire for more predictable returns and need diversification and risk mitigation,” said Mattatia.
“Overlays allow investors to calibrate their risk appetite, adjust potential returns and manage portfolio volatility.”
The increasing flexibility around index construction and higher quality of data to build robust strategies is seen as tailwind driver by Mattatia.
“There is scope for growth around thematic investing and the use of overlays which bodes well with structured products around the use of protection features and providing access to new investing opportunities,” he said.
According to Mattatia, decrement has shown its value and remains popular in some European markets because “they work well for issuers” and “can be used as a tool to calibrate risk appetite and allows banks to be more aggressive with pricing and shift the balance between index rise probability and coupon”.
“Decrement is also a flexible overlay that is now applied across different index types (ESG, growth, thematic),” he said.
On the debate about the use of percentage versus point decrement, Mattatia notes that percentage better represents market behaviour in significant moves whilst point decrement better reflects small dividend fluctuations. The ideal approach would combine both but would be too complex.
One area of focus at MSCI is risk control and intraday risk control innovations which are gaining traction in some
markets like the US as a complement to the activity seen around decrement strategies in Europe.
“Risk Control has also gained attention of investors due to higher market volatility,” said Mattatia.
“The effectiveness of some of the innovations we see in the market such as the intraday risk control is still being evaluated - some sophisticated indexes rebalance up to 13 times daily, and there is some scepticism about the costbenefit ratio.”
Mattatia also noted a growing interest in simplifying complex investment strategies and an increasing convergence between traditional market cap indices and overlay strategies with core benchmarks like the MSCI World “now offering decrement and risk control versions”.
ESG - Climate Indexes
Looking at ESG and climate indexes, the index provider has been a market leader in this space serving institutional and retail markets for a number of years.
“The range of MSCI ESG and climate indexes has expanded during this time, taking in more thematic approaches that help investors prioritise the likes of climate adaptation, sustainability innovation, ocean sustainability, climate change mitigation and companies helping control climate consequences,” said Mattatia.
Before 2022, Mattatia notes, much of the market focus was on solely on ESG ratings and climate stocks, but now investors want exposure to emerging markets and companies helping with fluid control, heating/cooling installations, and climate resilience technologies.
“We see sustainability as a long-term phenomenon that will adapt to geopolitical and economic changes and will also rotate its focus on different sustainability aspects as investors priorities evolve,” Mattatia said.
STOXX: market is assessing potential trading and hedging costs under new ESG guidelines
The new Esma guidelines that applies to products that have ESG terminology or ESGrelated language in their names and marketing materials, regardless of their classification under the Sustainable Finance Disclosure Regulation (SFDR) is impacting both buy-side and sell-side providers, as well as index providers.
STOXX has been working with clients as the methodology of some of the indices affected had to be changed or rename the indices altogether to align them with the Esma guidelines. This is leading to discussions with large clients about the implications, such as potential trading and hedging costs.
According to Loeb, there is a need to balance complying with the guidelines while also avoiding confusion for distributors and investors who are now used to seeing certain ESG terminology. The focus currently is on managing the implementation of the Esma guidelines and the impact on our index inventory.
“We are spending a lot of time discussing with clients whether to launch new indices that clone existing ones with different names, or to simply update the methodologies of the existing indices to comply with the new guidelines,” she said.
“This process has been very time-consuming, as they need to carefully evaluate the turnover, performance impact, and other factors for each index affected by the new guidelines. As a major priority this challenge has left little bandwidth to focus on developing new initiatives or products.”
Despite the focus on resolving this issue and a shift in focus from investors STOXX has not seen a decrease in demand for ESG underlyings and the decrement overlay with or without ESG.
Earlier this year, Axel Lomholt, CEO of STOXX and chairman of the STOXX Management Board, told SRP that institutional investors such as pension funds are shifting their attention towards more customised and bespoke solutions as they seek to incorporate ESG and climaterelated factors into their portfolios.
Lomholt noted that the discussion has evolved and there is a need to separate ESG and climate, as climate
risk is a unique and complex conversation that requires a different approach.
“The structured products market has also seen an evolution of ESG products, with different ways to deliver this thematic (green bond, ESG underlyings, positive impact),” he said.
Lomholt believes that the lack of clarity from regulators and cumbersome guidelines such as the SFDR regulation in Europe has caused division among market participants.
“There are parallels between the current ESG market and the early days of ETFs,” said Lomholt. “A consolidation phase is now occurring. Challenges in defining ESG and the technical complexity involved in building climate-related portfolios remain, but AI could play a role in addressing these challenges.”
The index provider’s main ESG underlying in the structured products market is the Stoxx Global ESG Leaders Select 50 EUR Index 38 live products/US$2.2 billion); followed by the Euro Stoxx 50 ESG Index (86 live products/ US$2.23 billion); the Stoxx Europe ESG Leaders Select 30 EUR Index (187 live products/US$1.7 billion).
On the decrement side, STOXX also has several indices among the most featured in structured products including the Euro iStoxx 70 Equal Weight Decrement 5% index (62 products/US$1.1 billion); the Euro iStoxx Ocean Care 40 Decrement 5% Index (28 products/US$660.38m); and the iStoxx Europe 600 Basic Resources GR Decrement 50 Index (58 products/US$252.5m).
STOXX’s thematic offering in the structured products market include the iStoxx Europe Demography 50 index (40 products/US$1.1 billion); the iStoxx AI Global Artificial Intelligence High Dividend 30 Index (eight products/US$73.20m); and the iStoxx Global Cities of Tomorrow Select 30 index (seven products/US$82.72m), among others.
Looking ahead
Axel Lomholt CEO of STOXX and chairman of the STOXX Management Board
On market trends / structured products
Institutional investors, such as pension funds, are shift their attention towards more customised and bespoke solutions as they seek to incorporate ESG and climate-related factors into their portfolios.
STOXX ISS is well positioned to capitalise on the continued focus on thematics, factors, and ESG in the market, as these are areas of strength for the index provider. STOXX is also building out their fixed income capabilities, acknowledging the challenges of competing in this space but identifying opportunities in climate-related and ESGfocused fixed income products.
On ESG vs. Climate
The discussion has evolved and there is a need to separate ESG and climate, as climate risk is a unique and complex conversation that requires a different approach. The structured products market has also seen an evolution of ESG products, with different ways to deliver this thematic (green bond, ESG underlyings, positive impact).
The lack of clarity from regulators and cumbersome guidelines such as the SFDR regulation in Europe has caused division among market participants. There are parallels between the current ESG market and the early days of ETFs. A consolidation phase is now occurring. Challenges in defining ESG and the technical complexity involved in building climate-related portfolios remain, but AI could play a role in addressing these challenges.
How does ISS acquisition helps improve STOXX’s ESG offering
Data sets have also improved but there is still a need to access high-quality data. There are also challenges when working with multiple data providers because of issues relating to ensuring quality and control. The acquisition of ISS and the integration of ISS’ ESG data and analytics has provided Stoxx with better access to data and research, which can enhance their structured product offerings.
The AI revolution will continue to have a significant impact on the asset management industry and will reshape how investment decisions are made. There are two main categories of AI products that will drive market exposure: infrastructure providers (e.g., Nvidia, Palantir) and companies benefiting from AI applications.
On looking ahead - opportunities
STOXX will continue to focus on quality and sustainable long-term solutions, rather than quick-fix approaches, as a key differentiator in the competitive landscape. Research and back-testing will be a focus in developing new products, particularly in the context of ESG and climate-related investments. Stoxx will leverage ISS’s capabilities to create robust, high-quality investment solutions.
Rebalancing Holiday Schedule
Decrement Level
Quarterly on the third Friday of March, June, September and December
Observes trading Holidays for NYSEm Nasdaq, Euronext Paris and XETRA
50 index points deducted on a rolling basis
Each step can be configured with different parameters to meet investor objectives and align with the requirements of the theme. High-quality historical data is critical for index designers to minimize backtest biases, including those arising from data revisions or survivorship effects.
The implementation process should also include rigorous quality assurance testing to detect any data gaps or operational errors, as these issues can materially distort the results.
The Garage
To bring all of this to life, MerQube has launched The Garage–a purpose-built online platform designed for rapid experimentation and iteration. With The Garage, users can validate their Decrement Index ideas at scale without the need to manage the underlying construction mechanics.
The platform delivers immediate results through an interactive interface, offering analytics and built-in benchmarking tools. Users can compare performance across ideas or against benchmarks, explore auto-generated sample documentation, and share outcomes with peers to build consensus.
From testing to launch, the entire process is streamlined–fast, accurate, and robust–allowing users to move from concept to market with confidence and speed.
Thematic indices
Thematic indices provide exposure to broad investment themes evolving around the adoption of forward-looking structural changes that are expected to transform social and economic affairs.
Often these indices track constituents based in emerging markets or companies in sectors undergoing dramatic overhaul due to the emergence of innovative technologies such as AI, robotics or cybersecurity.
Ninety-one unique thematic indices were registered on the SRP global database between 2022-2024. They were used to underly 660 products worth an estimated US$4.8 billion in the period.
Having remained stable in 2022 and 2023, with issuance around the 190 mark and sales volumes of US$1.2 billion
and US$1.3 billion, respectively, demand for thematic indices surged in 2024 when 275 products gathered an estimated US$2.2 billion in sales – up 65% year-on-year (YoY). The market share for thematic indices out of the total index-linked offer by sales volume increased to 1.7%, up from 0.9% in 2022 and 1.0% in 2023.
Demand for thematic indices has always been the highest in Emea, with interest from investors in the Americas and Asia Pacific only marginal, and this remained the case for the period under review. In 2024, US$2.2 billion was gathered in Europe where Italy was one of the front-runners with US$640m from five products linked to the Euro iStoxx 50 Artificial Intelligence Tilted NR Decrement 5% Index alone while in France US$260m was invested in 55 products tied to the iEdge Transatlantic Luxury Goods & Services 10 EW Decrement 50 Points GTR Index.
Other indices with the AI and robotics theme included the iEdge Artificial Intelligence & Robotics 10 EW Decrement 50 Points GTR Index (US$65m), Bloomberg DM Artificial Intelligence 50 Point Decrement Jul 2024 EUR Index (US$55m) and the Solactive AI Data & Robotics EUR AR Index (US$18m).
Digital solutions and cybersecurity was another thematic that increased its market share in 2024. Averaging at 17% over the period, products linked to this theme sold an estimated US$420m in 2024 – up US$225m YoY – with most of its sales coming from structures tied to the Euro iStoxx 50 Digital Security Tilted NR Decrement 4.5% Index (US$405m) and, to a lesser extent, the Solactive Cyber Security & Data Protection Decrement 50 Index (US$30m).
Indices linked to economic sovereignty such as the Euronext Sovereign Economy Selection Eurozone 50 Decrement 50 Index and indices linked to food, sport & wellbeing such as the iEdge Sport & Sponsors EW Decrement 5% NTR Index collected US$74m and US$67m, respectively, in 2024 after not being visible at all in 2023.
On the flip side, urban development indices, which had gathered US$145m in 2023, or 11% market share, disappeared from view in 2024.
Index providers
STOXX was the main provider of thematic indices in the period, averaging 30% market share between 2022-2024,
ahead of Bloomberg (16%), SGX (14%) and Solactive (13%), which all achieved double digit figures.
Products linked to STOXX thematic indices registered a 3.5fold YoY increase in sales volumes: from US$210m in 2023 to an estimated US$950m in 2024 – or in terms of market share up from 16% to 42%.
Bloomberg (16% average), which was one of the market leaders in 2023 with 18% market share, registered a decline of five percentage points in 2024, despite higher volumes (US$240m in 2023 vs US$290m in 2024).
SGX (14% average) registered a small YoY increase in market share in 2024 (+2%) on the back of its iEdge indices while that of Solactive (13% average) continued its decline: from 21% in 2022 to 13% in 2023 to 9% in 2024.
MSCI (7% average) completed the top five. Its main thematic index in the period was the MSCI World IMI Digital Health Select 5% Risk Control EUR Index which was used by both BNP Paribas and KBC. It was seen in 17 products (US$150m) across five different jurisdictions including Italy (six products), Slovakia, Poland (four each), Hungary (two) and the Czech Republic (one).
Another MSCI index, the MSCI World Select Hydrogen Tilted 4.5% Decrement, was used by Intesa Sanpaolo in Italy for a six-year capital protection product that sold €42.8m (US$48.6m).
Thematic indices: top 10 index providers by market share 2022-2024
MerQube: demand for thematic exposures has shifted
In mid-2021 MerQube and J.P. Morgan partnered to leverage J.P. Morgan’s structured investment risk management and MerQube’s index design capabilities.
The initial index to come out of this partnership, the MerQube US Tech+ Vol Advantage Index is now linked to more than US$1.7 billion in structured products. Since then, the index specialist fintech has deployed 56 indices used across more than five thousand products worth US$3.8 billion.
The top three MerQube indexes by market share are part of its Vol Advantage range which uses intraday volatility overlays - MerQube US Tech+ Vol Advantage index 50%; MerQube US Large Cap Vol Advantage index 48%; MerQube US small cal Vol Advantage index 2%.
However, in France and Finland all the MerQube indexes offer a synthetic dividend on custom indexes such as the MerQube Europe Large Cap Basic Resources 20-50 Point Decrement as well as on single stocks – MerQube Engie 1 Point Decrement EUR Index; MerQube MGBN 5.0 Index Points Decrement.
SRP spoke to Tianyin Cheng, head of products at MerQube, to discuss the ESG/decrement/thematic landscape, drivers of activity and opportunities going forward.
Demand for ESG/decrement products has decreased over the last couple of years. What do you think is the reason for this decline?
While political and regulatory uncertainty has contributed to the slowdown in ESG product adoption in certain markets, it’s not the only – or even primary – factor. Across the board, we’re seeing a more informed and selective investor base. For a time, there was a strong appetite for anything with an ESG label. Now, investors are demanding credible, bespoke strategies underpinned by granular, transparent data that align with their specific ESG objectives.
This shift toward higher standards is why we announced our partnership with Impact Cubed in November 2023 – to provide ESG index solutions backed by robust analytics that meet these evolving expectations.
At the same time, demand for structured products hasn’t disappeared – it’s shifted. We’ve seen growing interest in simple decrement strategies across single stock, static basket, core regional and multi-sector designs.
In a more volatile and discerning market, the focus has turned toward tactical and customizable exposures. With platforms like The Garage, MerQube is well-positioned to meet that demand quickly and precisely.
Is regulatory uncertainty impacting adoption of ESG structured products?
Tianyin Cheng: Regulatory uncertainty does play a role in slowing adoption, but it’s not the sole or even primary driver. What we’re seeing is a more sophisticated and discerning investor base that is increasingly critical of how “ESG” is defined and implemented.
Heightened regulatory scrutiny has amplified this scrutiny, but investor expectations were already evolving – with greater emphasis on measurable impact, credible ESG integration, and long-term performance resilience. This shift toward higher standards and more cautious product selection inherently lengthens the evaluation cycle, which in turn slows overall market adoption.
Does decrement make sense in the current environment?
Tianyin Cheng: Yes, though we’ve definitely seen preferences shift over time. When dividend levels were relatively stable, percentage-rate decrement indices were the go-to – they were simple and intuitive.
But as we head deeper into 2025 and macro uncertainty rises, we’re seeing a renewed interest in point-based decrement structures, which tend to be more robust when dividend yields are volatile or difficult to forecast.
Impact Cubed: ESG state of play & what integration looks like in 2025
The investment solutions provider recently made headlines with the Japanese Government Pension Investment Fund (GPIF), who will leverage their suite of ESG data. They also announced a partnership with MerQube to create bespoke next generation ESG indices using their 3D-ESG methodology which optimises risk, return and impact simultaneously.
SRP spoke to Antonia Lim, CIO, Impact Cubed, to discuss the state of play in the ESG space and the importance of working with quantitative, granular data to develop new investment strategies that are aligned with sustainable and ESG goals.
Looking at how the ESG landscape is evolving for institutional investors against a backdrop of political shifts and geopolitical tensions, Lim notes that “while political narratives around ESG have undoubtedly intensified, especially in the US, ESG itself is not disappearing”.
“Rather, how institutional investors incorporate sustainability considerations is evolving,” she said. “We see a clear pivot away from relying on composite ESG ratings towards a deeper use of empirical, granular, outcomebased data.”
According to Lim, investors are recognising that ratings often obscure underlying risks and opportunities, whereas factual datasets — like the ones offered by Impact Cubed which covers over 2,300 products and services from every listed company, globally — enable direct integration of sustainability factors into risk and return frameworks.
“Much of what we enable — custom baskets, sustainability attribution, factor-based portfolio construction — simply cannot be achieved through traditional ESG ratings,” said Lim.
Given this shift, what does best practice ESG integration looks like today?
Antonia Lim: Best practice now involves integrating sustainability considerations alongside risk and return, not treating them as separate factors. We developed a 3D approach explicitly to incorporate impact within
portfolio construction, providing a more holistic investment framework.
Using our factorised ESG data, it connects top-down macro portfolio and single security analysis, so we can model entire universes, bespoke stock baskets, and fund peer groups, helping clients visualise and optimise across risk, return, and impact dimensions simultaneously.
This enables better index and portfolio creation by identifying new efficient frontiers, as well as peer benchmarking — capabilities that traditional risk-return frameworks simply cannot deliver.
Could you share examples where Impact Cubed indices have been used to structured investable products?
Antonia Lim: Very recently, we developed the bespoke underlying index launched in a new UCITS fund for a large European Pension Plan.
Because we could lean into both our expertise in ESG data and quant investment, we could ensure the fund optimally met both the client’s sustainable impact objectives and practical derivatives trading requirements. It also happily led to an industry award (IPE Silver) for the client!
We’ve partnered with index calculation agents too. For example MerQube have collaborated with us to launch biodiversity-aligned indices, tailored to investors seeking diversification while addressing nature-related risks. This was then structured into a note for a global Wealth Manager.
These include the MerQube Impact Cubed Critical Minerals, MerQube Impact Cubed Developed Markets Biodiversity, MerQube Impact Cubed Water Leaders Index and MerQube Impact Cubed Transatlantic Biodiversity Equal Weighted Index, among others.
