Newest ESG ETF Index Trackers on the Block

    Stockholm (NordSIP) – Today, DWS (previously known as Deutsche Bank Asset Management) announces the launch of four new ESG Xtrackers ETFs. These funds will track indices that are part of the MSCI ESG Leaders Low Carbon ex Tobacco Involvement 5% series, in which included companies meet strict ESG and low carbon requirements, based on MSCI’s proprietary ESG research.

    More specifically, to be included in the ETF, a company first has to qualify for inclusion into the MSCI Word Index, which consists of 1,648 companies*. Firstly, companies are excluded from this list if they are exposed to nuclear power, controversial weapons or tobacco production, or if they show sales more than $1 billion or 50% of their overall sales related to alcohol or gambling. A ‘controversies screen’ identifies companies with serious ESG controversies, which are then also excluded. Once it has passed these first thresholds, a company has to survive two more screenings: one based on ESG requirements and one based on carbon emissions.

    The ESG rating is peer-related, and the bottom of the list is cut out. For carbon emissions, both current and potential emissions are taken into account, and the most carbon-intensive companies are filtered out. In total, 635 companies* currently make it into the MSCI World-derived index, and they are market-capitalisation weighted.

    This new set of ETFs complements DWS’s existing offering of Xtrackers II ESG EUR Corporate Bond UCITS ETF, which is also based on a comprehensive MSCI screening process. Also, DWS currently counts over €20 billion AUM in dedicated ESG strategies, which includes seven sustainable and impact funds.

    Stay tuned for more on the methods and thoughts behind this new range of products, as we will be catching up with Michael Lewis, Head of Sustainable Finance Research at Deutsche Asset Management within a couple of weeks.


    *as of 30 April 2018, according to MSCI as cited by the DWS press release

    Picture © Patpitchaya – Shutterstock

    Aline Reichenberg Gustafsson, CFA
    Aline Reichenberg Gustafsson, CFA
    Aline Reichenberg Gustafsson, CFA is Editor-in-Chief for NordSIP and Managing Director for Big Green Tree Media. She has 18 years of experience in the asset management industry in Stockholm, London and Geneva, including as a long/short equity hedge fund portfolio manager, and buy-side analyst, but also as CFO and COO in several asset management firms. Aline holds an MBA from Harvard Business School and a License in Economic Sciences from the University of Geneva.

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