DWS has launched a new ETF – the Xtrackers S&P 500 ESG ETF (SNPE US) – which provides exposure to S&P 500 constituents while screening out firms with the lowest environmental, social, and governance (ESG) profiles.
The fund provides ESG-screened exposure while maintaining a similar risk profile to the S&P 500 Index.
The fund has been listed on NYSE Arca and is linked to the S&P 500 ESG Index.
The index uses data from Sustainalytics to screen out firms with significant business activities linked to the tobacco and controversial weapons industries.
Companies with weak adherence to the UN Global Compact Principles are also excluded.
The remaining constituents are then assigned an ESG score based on SAM’s (formerly RobecoSAM) ‘Corporate Sustainability Assessment’.
This score is either calculated directly by a company completing a comprehensive assessment (together with supporting documents), or – in the absence of this – by using publicly available information.
Those firms with the lowest ESG scores are removed, whilst aiming to maintain 75% of the float-adjusted market capitalization of each Global Industry Classification Standard (GICS) Industry Group within the S&P 500.
The index is then weighted by float-adjusted market cap, with reconstitutions and rebalancings occurring annually in April.
According to S&P Dow Jones Indices, the methodology provides an index that is aligned with socially responsible investing values while maintaining a risk and return profile similar to the parent index. It targets a tracking error of less than 100 basis points relative to the parent S&P 500.
“We are pleased to reach this licensing agreement and work with DWS Group on their new ETF based on the S&P 500 ESG Index,” said Reid Steadman, S&P DJI’s Global Head of ESG Indices. “The S&P 500 ESG Index was developed to support the growth of sustainable investing. Through the use of the new S&P DJI ESG scores, the index helps investors align their investments with their values while still achieving a risk and return profile in line with the S&P 500.”
The fund comes with an expense ratio of 0.11%. Distributions are sent to investors on a quarterly basis.
The launch takes the total number of funds within DWS’s ESG ETF suite to five. The other funds, which track MSCI indices, are as follows:
Xtrackers MSCI USA ESG Leaders Equity ETF (USSG US); 0.10%
Xtrackers MSCI ACWI ex USA ESG Leaders Equity ETF (ACSG US); 0.16%
Xtrackers MSCI EAFE ESG Leaders Equity ETF (EASG US); 0.14%
Xtrackers MSCI Emerging Markets ESG Leaders Equity ETF (EMSG US); 0.20%
“Our clients seek solutions that not only deliver on their investment strategy, but also help them achieve their sustainability goals,” said Luke Oliver, Head of Index Investing for the Americas at DWS. “Through our Xtrackers ESG ETF suite, investors are able to access Environmental, Social and Governance adjusted core benchmarks that they can use at the heart of their portfolios, allowing them to invest in companies that are well-positioned for the future.”
European investors looking for ESG-screened S&P 500 exposure could consider the UBS ETF S&P 500 ESG UCITS ETF (S5SD LN). This fund has approximately $90 million in assets under management and comes with an expense ratio of 0.12%.