DWS has expanded its line-up of sustainable ETFs with the introduction of a new fund providing ESG-managed exposure to the global US dollar corporate bond market.
DWS now offers ESG-screened ETFs targeting US dollar and euro corporate bond markets.
The Xtrackers ESG USD Corporate Bond UCITS ETF has listed on the London Stock Exchange, in US dollars (XZBD LN) and pound sterling (XZBU LN), and on Xetra, in euros (XZBU GY).
The fund has launched with $25 million in assets and comes with an expense ratio of 0.16%.
It is linked to the Bloomberg Barclays MSCI USD Liquid Investment Grade Corporate Sustainable and SRI Index which is based on the parent Bloomberg Barclays USD Liquid Corporates Index universe.
The parent universe consists of investment-grade, fixed-rate bonds issued in US dollars by corporate entities globally. Eligible issues must have at least three years remaining to maturity and a minimum amount outstanding of $750m.
Indexing and ESG giant MSCI provides the ESG methodology which comprises two steps.
In the first step, companies with operations linked to alcohol, gambling, tobacco, weapons, pornography, and genetically modified organisms are screened out. In the second step, companies that pass the screening process are assigned scores that indicate a firm’s ability to manage key ESG risks relative to sector peers. Companies scoring average or higher make the final cut.
Securities are weighted by the market value of debt outstanding and rebalanced on a monthly basis.
The fund is designed to meet surging demand from investors for ESG exposure, with DWS noting that over €1.1 billion of net new assets flowed into its ESG Xtrackers ETFs in the first half of the year.
The firm offers a further two fixed income ETFs, both of which utilize a similar methodology. The €700m Xtrackers ESG EUR Corporate Bond UCITS ETF provides broad exposure to euro-denominated corporate bonds, while the €30m Xtrackers ESG EUR Corporate Bond Short Duration UCITS ETF targets bonds at the short end of the yield curve.