The four new ETFs provide exposure to ESG-filtered equity indices tracking global, US, Japanese and European markets (see product table).
“Sustainability is one of our key values, which means we not only want to meet demand for responsible investing, we also aim to actively encourage it,” said Petra Pflaum, DWS Chief Investment Officer for Responsible Investments.
The new ETFs track indices that are part of the MSCI ESG Leaders Low Carbon ex-Tobacco Involvement 5% series. The indices use filtering based on MSCI ESG research to ensure that included companies meet strict ESG and low carbon requirements.
DWS’s investment methodology involves applying screening filters – based on ESG requirements and carbon emissions – to the 1,648 companies on the MSCI Word Index.
Companies with exposure to nuclear power, controversial weapons or tobacco production are excluded, as are companies with excessive revenues (US$1 billion or 50% of earnings) coming from areas such as alcohol, gambling or conventional weapons.
Remaining companies are then given an ESG rating relative to peers, with those below a certain threshold excluded.
A ‘controversies screen’ is also applied to exclude companies deemed to be involved in serious ESG controversies.
The carbon emissions screening methodology is based on assessments of current emissions and potential emissions and is designed to filter out the most carbon intensive companies.
The final ESG/low carbon MSCI World-derived index – which the ‘Xtrackers’ ETF tracks – comprises 635 companies from the original 1,649, weighted by market capitalisation.
The incorporation of ESG factors – beyond financial factors – at DWS is integrated into the investment decision-making process for liquid and illiquid products.
DWS has more than €20m dedicated ESG assets under management, including seven sustainable and impact funds investing in sectors such as clean energy, energy storage and water, as well as real estate investments in certified green-labelled buildings.
DWS’s existing ‘Xtrackers’ II ESG EUR Corporate Bond UCITS ETF 1C EUR also uses a similar MSCI screening process and posted returns of 3.75% over the last three years (to 15 May).