BlackRock has cross-listed the iShares MSCI Japan SRI ETF (Xetra: SXR6) on Deutsche Börse’s Xetra and Frankfurt exchanges, shortly after the fund initially launched on the London Stock Exchange in early March 2017. The fund provides access to Japanese companies with high environmental, social and governance (ESG) characteristics as determined by index provider MSCI.

The underlying Japan Socially Responsible Index tracks Japanese equities with an MSCI ESG rating of A or higher.

Trading in euros, the ETF tracks the Japan Socially Responsible Index. MSCI initially screens out firms involved in alcohol, tobacco, gambling, civilian firearms, military weapons, nuclear power, adult entertainment and genetically modified organisms. The index provider furthermore evaluates each remaining firm based on the most pertinent ESG themes specific to its sub-industry and assigns an ESG rating between AAA (highest) and CCC (lowest). Securities are only included in the index if they achieve a grading of A or above.

Index constituents are weighted by free-float market capitalization.

The fund is physically-replicating and has a total expense ratio (TER) of 0.30%.

As of 15 March 2017 the ETF has 63 constituents and significant exposure to the consumer discretionary (25.0%), industrials (17.3%), information technology (13.2%), telecommunications (10.8%) and materials (9.7%) sectors. The largest holdings include Honda (6.7%), KDDI (6.4%), Sony (5.3%), and NTT Docomo (4.4%).

iShares has previously launched a currency-hedged version of the fund in May 2016 – the iShares Sustainable MSCI Japan SRI EUR Hedged UCITS ETF (SUSJ) trades on the London Stock Exchange in euros and sterling, and on Xetra in euros. Its TER is 0.35%.

The MSCI Japan Socially Responsible Index also underpins the UBS ETF – MSCI Japan Socially Responsible UCITS ETF (JPY) which was launched in August 2015. The fund trades in euros and does not apply currency hedging. It has a TER of 0.40%.

An increasing body of research is emerging that shows that by tilting towards companies exhibiting ESG strength, indices are better able to capture long-term sustainable returns by avoiding companies subject to social and environmental risks and favouring those which follow good management techniques.