DWS has broadened its line-up of climate-focused ETFs in Europe with three new equity funds that are aligned with the carbon reduction goals of the Paris Agreement.

The Paris Agreement aims to limit global warming to 1.5°C above pre-industrial levels by 2050.

Listed on London Stock Exchange in US dollars and pound sterling, as well as on Deutsche Börse Xetra in euros, the new ETFs provide large and mid-cap exposure to stocks from the US, Europe, and Japan.

They are the Xtrackers USA Net Zero Pathway Paris Aligned UCITS ETF (XNUS GY), which comes with an expense ratio of 0.10%, and the Xtrackers Europe Net Zero Pathway Paris Aligned UCITS ETF (XEPA GY) and Xtrackers Japan Net Zero Pathway Paris Aligned UCITS ETF (XNJP GY), both of which are priced at 0.15%.

The new listings build upon DWS’s two existing Paris-aligned ETFs which debuted in March and target equities from developed markets globally and the eurozone. The Xtrackers World Net Zero Pathway Paris Aligned UCITS ETF (XNZW GY) and Xtrackers EMU Net Zero Pathway Paris Aligned UCITS ETF (XNZE GY) have expense ratios of 0.19% and 0.15%, respectively.

Simon Klein, Global Head of Passive Sales at DWS, said: “We see impact investing as one of the major future tasks for asset managers. With these new ETFs, we are expanding our range of climate agreement-oriented ETFs to include important investment regions with a view to performance potential and diversification. The recent CREATE Report has shown that institutional investors are looking for solutions to implement impact investing in their portfolios.”

Methodology

All five ETFs track Solactive ISS ESG Net Zero Pathway indices which satisfy the requirements of the EU’s Paris Aligned Benchmark (PAB) regulation, aligning with a trajectory to limit global warming to 1.5°C above pre-industrial levels by 2050.

The indices go beyond the PAB requirement, however, incorporating recommendations from the Institutional Investors Group on Climate Change (IIGCC) to ensure that climate metrics are the primary driver of active company weights.

The indices first screen out violators of international principles, companies with very low overall ESG scores, firms deemed to be hampering certain UN Sustainable Development Goals, and issuers with business activities linked to coal mining, fossil fuels, oil sands, tobacco, and weapons.

The indices then weight the remaining constituents in order to satisfy the EU’s PAB requirement. This translates to an immediate 50% reduction in weighted average carbon intensity compared to the initial universe as well as a 7% annual decarbonization going forward.

Based on the IIGCC’s recommendations, the indices then further tilt constituent weights in favour of companies that have adopted science-based emissions targets, those that maintain high climate disclosure standards, and those that generate significant green revenues.

All five ETFs are classified as Article 9 products under the EU’s Sustainable Finance Disclosures Regulation (SFDR).