German investment giant Deka has partnered with MSCI to launch a suite of responsible ETFs that combine low-carbon and environmental, social, and governance (ESG) investment strategies.

The ETFs incorporate business exclusion criteria and broad ESG screening before weighting constituents according to a low carbon score.

The five Deka MSCI Climate Change ESG ETFs, which target global developed, US, European, eurozone, and German equity markets, have listed on Deutsche Börse Xetra and come with expense ratios ranging between 0.20% and 0.25%.

Each ETF is linked to a MSCI Climate Change ESG Select Index which selects its constituents from the relevant geographic MSCI universe of large- and mid-cap stocks.

Companies deriving revenue from activities related to nuclear weapons, tobacco, thermal coal, nuclear power, and unconventional oil & gas, as well as firms that are not in compliance with the United Nations Global Compact principles are excluded.

Each company is then assigned an ESG score on a seven-point scale between AAA and CCC based on the most relevant ESG factors by industry and risk exposure. “ESG laggards” – those with ratings in the bottom two ranks – are also removed.

The remaining constituents are reweighted based on MSCI’s Low Carbon transition score which measures a company’s exposure to low carbon transition risk, carbon emissions, and fossil fuel reserves, as well as its exposure to opportunities including alternative energy and clean-technology.

The Low Carbon transition score is calculated based on two factors. The first is determined by grouping companies into one of five categories based on the predominant risks and opportunities firms in the same industry are most likely to face in the transition to a low carbon economy, while the second is an industry-agnostic evaluation of each company’s position in the transition.

Any stock is capped at a 10% limit. Reconstitution and rebalancing occur semi-annually.

The funds, along with their expense ratios, are as follows:

Deka MSCI World Climate Change ESG UCITS ETF (D6RP GY); 0.25%
Deka MSCI USA Climate Change ESG UCITS ETF (D6RQ GY); 0.25%
Deka MSCI Europe Climate Change ESG UCITS ETF (D6RR GY); 0.25%
Deka MSCI EMU Climate Change ESG UCITS ETF (D6RS GY); 0.20%
Deka MSCI Germany Climate Change ESG UCITS ETF (D6RT GY); 0.20%

Climate-change strategies have been a hot spot for ETF launches lately. Just this month, Lyxor unveiled a suite of equity ETFs aligned with the de-carbonization objectives of the Paris Accord, while its local rival Amundi followed shortly thereafter with its own Paris-aligned ETFs. HSBC GAM began rolling out ETFs in June that combine ESG and low-carbon methodologies.

Deka, however, is the only firm among the four issuers to launch a climate change ETF that focuses on German equities.