German index provider Solactive has launched a new SRI equity index which focuses on the theme of plastic reduction.

The index includes companies that actively support the reduction, reuse, and recycling of plastic products.

The Solactive ISS ESG Beyond Plastic Waste Index supports the “Reduce-Reuse-Recycle” credo by including companies offering solutions for the reduction of plastic pollution or the promotion of reusable products, plastic substitutes, and efficient plastic recycling.

The index is available for licensing and suitable for use as the basis of index-linked investment products such as ETFs.

The index selects its constituents from a universe of developed and emerging market stocks that have market capitalizations greater than €200 million and average daily traded values above €100,000.

Solactive has partnered with ISS ESG, the responsible investment arm of Institutional Shareholder Services, which provides environmental, social, and governance (ESG) screening for the index.

The process first excludes any company that does not adhere to the United Nations Global Compact Principles or is exposed to any controversy regarding plastics. To be eligible for selection, firms must also have at least a minimum ISS ESG Corporate Rating, which covers a broad range of ESG-related factors, of C- (above-average).

ISS ESG then uses its proprietary data set to see if the remaining securities can be categorized under any of the three main index categories: Reduce, Reuse, and Recycle. Companies that offer solutions to reduce plastic waste but are at the same time at the centre of the plastic problem are not eligible for inclusion.

Each stock is assigned an equal weight, and the index is rebalanced semi-annually.

“The reduction of plastic waste is one of the greatest contemporary challenges confronting society,” said Timo Pfeiffer, Head of Research at Solactive. “According to the Ellen MacArthur Foundation, by 2050, there could be more plastic than fish in the sea by weight. Our new Solactive ISS ESG Beyond Plastic Waste Index recognizes companies, which take on the responsibility in an early stage, building a framework for asset managers to provide their clients the opportunity to invest consciously.”

Marija Kramer, Managing Director at ISS ESG, added, “Today’s launch of the Solactive ISS ESG Beyond Plastic Waste Index is very timely, given the sharp focus across the public and private sector, globally, on the mounting problem of plastic waste. With this index, investors will now be able to readily identify those companies taking a proactive approach to addressing plastic pollution and, conversely, portfolio companies who fall behind in this area.”

While there are currently no ETFs explicitly targeting the plastic theme, investors may be interested in an ETF launched earlier this year from BNP Paribas that also subscribes to the “Reduce-Reuse-Recycle” philosophy.

The BNP Paribas Easy ECPI Circular Economy Leaders UCITS ETF (REUSE FP) tracks the ECPI Circular Economy Leaders Equity Index which covers developed market companies that adhere to the so-called ‘circular economy’ business model – keeping resources in use for as long as possible, extracting the maximum value from them whilst in use, before recovering and regenerating products and materials at the end of each service life. The fund comes with an expense ratio of 0.30%.