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Xtracker universe broadens with launch of ESG-screened ETF

DWS (formerly Deutsche Asset Management) has launched four ETFs with an ESG and carbon filter. One offers exposure to 635 of the 1,649 companies in the MSCI World Index with the best ESG and carbon emission ratings.

Petra Pflaum, Chief Investment Officer for Responsible Investments at DWS. | Photo: PR: DWS

DWS -- a global EUR 700 billion asset manager -- has launched four new ETFs under the brand Xtrackers. The ETFs track the indices MSCI World, MSCI Japan, MSCI USA and MSCI Europe.

The new products are screened with an ESG and carbon-emission filter, thereby giving exposure to those equities with high environmental, social and governance (ESG) ratings based on MSCI ESG research.

This means that included companies must comply with ESG and low-carbon requirements.

For example, the MSCI World index is comprised of 1,648 companies. Two screening methodologies are applied to the companies in the index, one based on ESG requirements and one based on carbon emissions.

Companies with exposure to nuclear power, controversial weapons or tobacco production are excluded, as are companies with revenues of EUR 849 million or 50% of revenues 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, is comprised of 635 companies from the original 1,649.

“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,” says Petra Pflaum, DWS' Chief Investment Officer for Responsible Investments.

DWS manages over EUR 20 billion of 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.

EUR 700 billion asset manager adds UN goals to ESG screening

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