DWS has launched a new US equity ETF in the US targeting companies that are leading their sector peers in taking actions relating to the climate transition.
Arne Noack, Head of Systematic Investment Solutions, Americas at DWS.
The Xtrackers MSCI USA Climate Action Equity ETF (USCA US) has been listed on NYSE Arca, coming to market with an initial investment of $2 billion from Ilmarinen, Finland’s largest private earnings-related pension insurance company.
Dirk Goergen, CEO of DWS Americas, commented: “DWS is pleased to partner with Ilmarinen to establish this new Xtrackers fund in the US to help drive the transition to a low carbon economy. We are focused on providing investors with bespoke index investment solutions across asset classes and expanding the Xtrackers brand in the Americas with specialized products with attractive long-term return opportunities.”
Arne Noack, Head of Systematic Investment Solutions, Americas at DWS, added: “US investors considering how to lower their carbon emissions over the long term are looking for best-in-class, forward-looking strategies that align with their objectives. The launch of USCA is an example of our ability to launch products that meet the needs of our clients in a timely manner, while further extending our line-up of ETFs to invest in today’s markets.”
Methodology
The fund is linked to the MSCI USA Climate Action Index which is constructed from the parent MSCI USA universe of large and mid-cap stocks listed in the US.
The methodology first removes violators of UN Global Compact principles, companies embroiled in severe ESG-related controversies, and firms involved with controversial weapons, tobacco, thermal coal mining, oil sands, and nuclear weapons.
Additionally, companies ranked in the worst 5% of the initial universe based on carbon emissions or potential carbon emissions (a metric that reflects a firm’s fossil fuel reserves and the likelihood that it will use those reserves) are also eliminated from the selection pool.
The methodology then assigns each remaining company a ‘Climate Transition Score’ based on their emissions intensity, emissions reduction commitments, climate risk management, and revenue from ‘green’ businesses.
The index selects half the number of companies from each GICS sector, choosing those with the highest climate transition scores.
Constituents are weighted by float-adjusted market capitalization subject to a maximum security weight of 5% and a limit on GICS sector deviations of 5% relative to the parent universe.
As of the end of March, information technology stocks accounted for over a quarter (28.3%) of the index weight with the next-largest sector exposures being health care (16.0%), consumer discretionary (12.3%), communication services (11.0%), and financials (9.3%).
Notable positions included Microsoft (5.7%), Apple (5.2%), Alphabet (4.8%), Amazon (3.9%), and Nvidia (2.8%).
The ETF comes with an expense ratio of 0.07%.