BlackRock has launched a new German equity ETF in Europe which targets a risk profile comparable to the regular DAX index while simultaneously lowering carbon intensity and boosting ESG performance.

BlackRock has launched a German equity ETF targeting both low carbon and ESG-enhanced exposure.

The iShares DAX ESG UCITS ETF (EXIA GR) has listed on Deutsche Börse and is tradable in euros.

The fund is the first on the continent to track the DAX ESG Target Index which begins its construction process from the universe of the DAX – the most widely followed benchmark for German equities, consisting of 30 of the largest and most important companies listed on the Frankfurt Stock Exchange.

Companies with business operations linked to weapons, nuclear power, thermal coal, military contracting, tobacco, and oil sands are removed.

The methodology then looks to the HDAX Index – comprising companies in the large-cap DAX, the mid-cap MDAX, and the technology-focused TecDAX indices – and selects stocks in order to bring the total number of index constituents back up to 30. HDAX stocks selected for inclusion will be those that rank highest based on market capitalization and broad ESG score provided by Sustainalytics.

The index then uses an optimization process to weight securities so as to achieve three objectives: maximize the portfolio ESG score, reduce total carbon intensity by 30%, and limit tracking error versus the DAX to 1.5%. Individual securities are capped at 10%, and the index is rebalanced on a quarterly basis.

The fund comes with an expense ratio of 0.12%.

Dirk Schmitz, Country Head Germany, Austria, and Eastern Europe at BlackRock, said: “Since 1988, the DAX Index is tracking an essential part of the German economy, making it one of the leading price barometers. Many DAX companies do business on an international level. This means that in addition to their roots in the domestic market, they are also closely linked to the global economy. In this respect, the iShares DAX ESG UCITS ETF reflects the strength of a large part of the German economy as well as the global economy. This makes it interesting for domestic and international investors. A sustainable and, therefore, forward-looking approach is aligned with our clients’ long-term goals.”

Stephan Flaegel, Chief Product Officer, Indices and Benchmarks at Qontigo, added: “Earlier this month, the German federal government announced a new green financing strategy to steer capital towards environmental projects and develop Germany into a major hub for sustainable finance. Germany is taking a leading position on the global stage with a strong trend towards sustainable investing. The DAX ESG Target Index is an innovative solution that represents the German market, made possible by the combination of analytics and indexing that is at the core of our approach at Qontigo. At Qontigo, we aim to provide our clients with building blocks to optimize impact for sustainable portfolios by offering choice to reflect their unique sustainability preferences.”

ESG-aware investors seeking German equity exposure may also wish to consider ETFs linked to the DAX 50 ESG Index which consists of 50 stocks selected from the HDAX universe based on ESG score, trading volume, and market capitalization. Funds in Europe include the €5m CSIF (IE) DAX 50 ESG Blue UCITS ETF (CSYX GR), which comes with an expense ratio of 0.12%; the €130m Lyxor 1 DAX 50 ESG UCITS ETF (E909 GY), which has an expense ratio of 0.15%; and the €5m Amundi DAX 50 ESG UCITS ETF (DECD GY), which costs 0.19%.