Deutsche Asset Management has become the latest exchange-traded fund issuer to launch a fixed income ETF embedded with an environmental, social and corporate governance (ESG) screen.

The db x-trackers II ESG EUR Corporate Bond UCITS ETF tracks investment grade euro-denominated corporate bonds from companies with an ESG rating of BBB or higher, according to MSCI’s sustainability ratings system.

The physically-replicated db x-trackers II ESG EUR Corporate Bond UCITS ETF (Xetra: XB4F) tracks the Bloomberg Barclays MSCI Euro Corporate Sustainable and SRI Index, providing exposure to the euro-denominated corporate bond market while filtering out companies that do not meet certain sustainability, social and corporate governance requirements.

Petra Pflaum, Deutsche Asset Management’s Chief Investment Officer for Responsible Investments, commented: “The provision of environmental, social and corporate governance investment solutions is an essential part of Deutsche Asset Management’s overall offering. More investors are starting to access fixed income exposure using ETFs, so it is important to have ESG-focused bond exposure available in ETF form alongside our existing solutions.”

To be eligible for inclusion in the index, bonds must be investment-grade rated, have an amount outstanding of at least €300m, and an ESG rating of BBB or higher according to MSCI’s sustainability ratings system.

The methodology underpinning MSCI’s proprietary ESG model initially includes a screen to exclude firms linked to alcohol, gambling, tobacco, weapons, pornography and genetically modified organisms. Companies are then further analyzed according to their ESG scores with only those scoring BBB or higher making the final cut – a firm scores higher on the scale if it has strong employee rights, low levels of corruption, and a strong corporate governance structure. It also ranks well if it does not waste resources, it promotes education, safe-guards animal rights and protects the environment.

As of the end of January 2017, the fund’s index duration was 5.3 and its yield was 0.97%, showing almost identical yield and duration to its non-SRI equivalent – the Bloomberg Barclays Euro Aggregate Corporate Index duration was 5.4 and its yield was 0.98% on the same date. Five-year correlation between both indices is 99.8%, showing investors may still maintain exposures similar to the broad market while making socially responsible investment decisions.

The fund has a total expense ratio (TER) of 0.25%.

Its launch follows hot on the heels of the UBS Barclays MSCI Euro Area Liquid Corporates Sustainable UCITS ETF (Xetra: UIMC), which was unveiled at the end of January. The fund tracks the Barclays MSCI Euro Area Liquid Corporates Sustainable Index, providing exposure to euro area corporate bonds and also utilizing MSCI’s proprietary ESG model. Its TER is 0.20%.