DWS has unveiled two new socially responsible fixed income ETFs focused on sovereign debt issued in the eurozone.

DWS now offers three ETFs providing socially responsible exposure to eurozone government bonds.
The Xtrackers Eurozone Government Bond ESG Tilted UCITS ETF (XECB GY) provides broad market exposure to investment-grade securities from across the yield curve while tilting its portfolio in favour of countries with superior ESG profiles.
The Xtrackers Eurozone Government Green Bond UCITS ETF (XGEZ GY), meanwhile, specifically targets investment-grade ‘green bonds’ – fixed income securities whose proceeds are earmarked for projects that promote climate or other environmental sustainability purposes.
Both funds have been listed on Deutsche Börse Xetra in euros.
XECB comes with an expense ratio of 0.12% and is classified as an Article 8 product under the European Union’s Sustainable Finance Disclosure Regulation (SFDR), while XGEZ costs 0.18% and is labeled Article 9.
The new listings complement the Xtrackers ESG Eurozone Government Bond UCITS ETF (XZEB GY) which debuted in July and is similar to XECB in that it provides ESG-tilted exposure to eurozone sovereign debt; however, the fund also removes the bottom 20% of countries with the poorest ESG profiles.
ESG Tilted
XECB tracks the iBoxx EUR Sovereigns ESG Tilted Index which consists of fixed-rate, euro-denominated, investment-grade government securities with remaining maturities greater than one year.
The methodology removes bonds from countries with a ‘Severe’ sustainability risk rating, according to ESG analytics firm Sustainalytics, as well as bonds from countries with a ‘Not Free’ status from Freedom House, a non-profit organization conducting international research on democracy, political freedoms, and human rights.
Each country in the index is then assigned an overall ESG score based on several indicators related to environmental (energy, climate, and resource management), social (inequality, employment, human capital, health, and societal wellbeing) and governance (corruption, government effectiveness, political stability, regulatory quality, and rule of law) performance.
The index starts with the market value weights of the eligible countries before using the ESG scores to tilt towards countries with superior ESG profiles and away from countries with inferior ESG profiles. Any single country is capped at a maximum weight of 35%.
Green Bond
XGEZ, meanwhile, is linked to the iBoxx EUR Eurozone Sovereigns Green Bonds Capped Index which begins with a similar initial universe of eurozone government bonds and conducts the same exclusionary screens based on data from Sustainalytics and Freedom House.
The methodology then selects only bonds that are classified as “Green” by the Climate Bond Initiative, a non-profit organization working to mobilize bond markets for climate change solutions.
The organization has created a formal certification framework to ensure that a bond’s proceeds are only used for low-carbon and climate-enhancing projects, and that ongoing transparency and reporting requirements are met.
The index is weighted by market value while capping the weight of any single country at 35%.