Lyxor Asset Management has launched a new ETF providing exposure to large and mid-cap German equities with robust environmental, social, and governance (ESG) characteristics.
The fund provides exposure to 50 large and mid-cap German equities with robust ESG profiles.
The Lyxor 1 DAX 50 ESG UCITS ETF (E909 GY) has listed on Deutsche Börse Xetra in euros and comes with an expense ratio of 0.23%.
Income is distributed to investors.
The fund is linked to the DAX 50 ESG Index, belonging to the DAX family of indices which are referenced as key barometers of German stock market performance.
The index is designed to be a sustainable alternative to the DAX Index, the most widely followed benchmark for German equities.
“We are very pleased that Lyxor has selected the DAX 50 ESG Index for their new ETF,” said Stephan Flaegel, Global Head of Indices & Benchmarks at Qontigo. “With its robust framework and transparent methodology, the DAX 50 ESG Index is a liquid representation of the German equity market that enhances the sustainable profile of a portfolio.”
Constituents are selected from the HDAX universe which groups all equities that belong to either the large-cap DAX, the mid-cap MDAX, or the technology-focused TecDAX indices. The HDAX Index currently consists of 99 components.
The methodology harnesses insights from ESG analytics firm Sustainalytics to exclude companies that are involved with controversial weapons, tobacco, thermal coal, nuclear power, and military contracts, as well as those that are in violation of UN Global Compact Principles.
The remaining constituents are then assigned an ESG score that incorporates over 70 core and industry-specific indicators.
The assessment is structured within four dimensions: preparedness, an assessment of company management systems and policies designed to manage material ESG risks; disclosure, an assessment of whether company reporting meets international best practice standards and is transparent with respect to most material ESG issues; quantitative performance, an assessment of company ESG performance based on quantitative metrics such as carbon intensity; and qualitative performance, an assessment of company ESG performance based on the analysis of controversial incidents that the company may be involved in.
The rating also uses a “best-of-sector” analysis to compare companies within a given sector to industry best practices. Underlying each industry group template is a customized weight matrix designed to further highlight the key ESG issues faced by each sector.
Securities are ranked according to a combined score across three parameters: their ESG score, order book volume, and free-float market capitalization. The 50 top-ranked companies are selected for inclusion and weighted by free-float market capitalization subject to a single stock cap of 7%.
The index is reconstituted and rebalanced on a quarterly basis. DAX fast-exit and fast-entry rules apply including any sustainability breaches.
Its back-tested performance is broadly in line with that of the conventional DAX. Since 2012, the ESG index has outperformed the blue-chip German benchmark by a cumulative 1.71%, while its annualized volatility has been 0.36% lower.
Source: Qontigo.
The ESG index overweights the consumer, telecommunications, industrial, media, and retail sectors relative to the DAX. It has, on the other hand, a smaller representation of software and automobile stocks. Unlike the DAX, the ESG index includes no utility companies.
Source: Qontigo.