DWS has unveiled a fixed income ETF in Europe providing socially responsible exposure to US dollar-denominated corporate bonds near the front end of the yield curve.
DWS has introduced a short-duration USD corporate bond ETF with a socially responsible investment mandate.
The Xtrackers ESG USD Corporate Bond Short Duration UCITS ETF is available to trade on London Stock Exchange (Ticker: XYLD LN) and SIX Swiss Exchange (XYLD SW) in US dollars as well as on Xetra (XYLD GY) and Borsa Italiana (XYLD IM) in euros.
The ETF was created by repurposing the Xtrackers iBoxx USD Corporate Bond Yield Plus UCITS ETF which housed around $40 million in assets prior to transition.
The revamped fund now tracks the performance of the Bloomberg MSCI USD Corporate Sustainable and SRI 0-5 Years Index which consists of investment-grade, US dollar-denominated corporate bonds with remaining maturities between one month and five years. Eligible issuers must have a minimum of $300m notional outstanding.
The index implements strict ESG filters in line with MSCI‘s SRI (socially responsible investing) methodology. This results in the removal of issuers embroiled in severe ESG-related controversies, those involved in adult entertainment, alcohol, gambling, tobacco, weapons, nuclear power, and GMOs, as well as issuers that are rated BB or below by MSCI ESG Research. The entire process results in the removal of approximately 30% of the issuers from the parent universe.
As of 15 February, the index contained over 1,000 securities. It was yielding 2.11% with a modified duration of 2.4 years.
Michael Mohr, Head of Passive Products at DWS, said: “Investors can now access high-quality short duration ESG USD corporate bond exposure via a competitively priced Xtrackers ETF. We’re pleased to expand our ESG product suite further to meet that demand with this exposure. The addition of ESG filters creates a quality bias, helping improve the product’s risk profile at a moderate cost to yield.”
The ETF comes with an expense ratio of 0.16% and is also available through a euro-hedged share class which is priced slightly higher at 0.21%.