DWS has introduced its first Paris-aligned ETF in the US with the launch of the Xtrackers Net Zero Pathway Paris Aligned US Equity ETF (USNZ US) on NYSE Arca.
Arne Noack, Head of Systematic Investment Solutions, Americas at DWS.
The ETF is linked to the Solactive ISS ESG United States Net Zero Pathway Enhanced Index which begins with an initial universe of large and mid-cap equities listed in the US.
The methodology first screens 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 index initially weights the remaining constituents in order to satisfy the requirements of EU Paris Aligned Benchmark (PAB) regulation which involves an immediate 50% reduction in weighted average carbon intensity compared to the initial universe as well as a 7% annual decarbonization going forward.
The methodology goes beyond the PAB regulation, however, further incorporating recommendations from the Institutional Investors Group on Climate Change (IIGCC) to ensure that climate metrics are the primary driver of active company weights.
Based on the IIGCC’s recommendations, the index further tilts constituent weights in favour of companies that have adopted science-based emissions targets, firms that maintain high climate disclosure standards, and those that generate significant green revenues.
The fund has come to market with $50 million in initial assets. Its expense ratio is 0.10%.
Arne Noack, Head of Systematic Investment Solutions, Americas, at DWS, said: “There is a clear need for investments that align with net-zero aims. USNZ provides a powerful net-zero investment strategy that meets the latest regulatory standards that govern Paris-aligned benchmark indices as defined above. DWS has a long history of providing ETF investors with specialist investment opportunities that combine the efficiency of passive investing with the advantages of well-thought-out, rules-based strategies for particular needs. This new listing is another example of that.”
Other issuers offering Paris-aligned US equity ETFs in the US include SSGA, BlackRock, and Goldman Sachs.
The SPDR MSCI USA Climate Paris Aligned ETF (NZUS US) comes with an expense ratio of 0.10%, while the iShares Paris-Aligned Climate MSCI USA ETF (PABU US) costs 0.10%.
The Goldman Sachs ActiveBeta Paris-Aligned Climate US Large Cap Equity ETF (GPAL US), meanwhile, combines Goldman Sachs’ proprietary ‘ActiveBeta’ multi-factor investment approach with adherence to the carbon reduction goals of the Paris Agreement. Its expense ratio is 0.20%.