DWS has launched four new Xtrackers-branded ETFs, providing exposure to equities of firms with high environmental, social and governance (ESG) ratings, as well as small current and expected future carbon footprints. 

DWS launches Xtracker ETFs with sustainability focus

The funds, which target large- and mid-cap stocks in Japan, the US, Europe and globally, harness sustainability ratings from index provider MSCI.

Each underlying MSCI index excludes companies that generate more than 5% of their earnings from tobacco products. Additionally, companies from sectors with high potential for a negative ESG impact, such as alcohol, gambling, weapons or nuclear energy are not permitted in the reference indices.

Index construction is based on MSCI’s “Global Low Carbon Leaders” and “ESG Leaders” methodologies which are applied independently on the parent indices with securities selected by both methodologies being eligible for inclusion.

Using data from MSCI ESG Research, the “Global Low Carbon Leaders” methodology measures constituents’ greenhouse gas emissions and their potential carbon emissions from fossil fuel reserves.

The 20% of securities with the worst greenhouse gas emissions are excluded subject to sector constraints, while securities with the highest potential carbon emissions are also excluded such that half the total potential carbon emissions of the parent index is eliminated.

The “ESG Leaders” methodology evaluates each firm based on the most pertinent ESG themes specific to its sub-industry and assigns an ESG rating between AAA (highest) and CCC (lowest). Companies that are currently not constituents of the index are required to have an MSCI ESG rating above B to be considered eligible for addition.

All four ETFs have total expense ratios (TERs) of 15bps and are listed on Xetra and London Stock Exchange (LSE).

Japan

The Xtrackers ESG MSCI Japan UCITS ETF (XZMJ GY) tracks the MSCI Japan ESG Leaders Low Carbon ex Tobacco Involvement 5% Index, which screens the parent MSCI Japan Index.

The ESG index is most highly exposed to the consumer discretionary sector at 27.2%, followed by industrials at 16.9%. This makes it overweight consumer discretionary when compared with the parent index which has 20.2% exposure to the sector. The ESG index is underweight industrials when compared with its parent which has 21.3% exposure to the sector.

The fund trades in euros on Xetra and in US dollars on LSE (Ticker: XZMJ LN).  

USA

The Xtrackers ESG MSCI USA UCITS ETF (XZMU GY) tracks the MSCI USA ESG Leaders Low Carbon EX Tobacco Involvement 5% Index which screens the parent MSCI USA Index.

The ESG index is most highly exposed to the information technology sector at 28.4%, followed by financials at 18.1%. This makes it slightly overweight information technology when compared with the parent index which has 25.2% exposure to the sector. The ESG index is considerably underweight financials when compared with its parent which has 14.5% exposure to the sector.

The fund trades in euros on Xetra and in US dollars on LSE (Ticker: XZMU LN).  

Europe

The Xtrackers ESG MSCI Europe UCITS ETF 1C (XZEU GY) tracks the MSCI Europe ESG Leaders Low Carbon EX Tobacco Involvement 5% Index, which screens the parent MSCI Europe Index.

The ESG index is most highly exposed to the financials sector at 24.4%, followed by health care at 14.9%. This makes it overweight financials when compared with the parent index which has 20.9% exposure to the sector. The ESG index is also overweight health care when compared with its parent which has 11.9% exposure to the sector.

The fund trades in euros on Xetra and in pounds sterling on LSE (Ticker: XZEU LN).

World

The Xtrackers ESG MSCI World UCITS ETF 1C (XZW0 GY) tracks the MSCI World ESG Leaders Low Carbon ex Tobacco Involvement 5% Index, which screens the parent MSCI World Index.

The ESG index is most highly exposed to the financials sector at 21.9%, followed by information technology at 19.0%. This makes it overweight financials when compared with the parent index which has 17.9% exposure to the sector. The ESG index is also overweight information technology when compared with its parent which has 17.5% exposure to the sector.

The fund trades in euros on Xetra and in US dollars on LSE (Ticker: XZW0 LN).