DWS is set to introduce a socially responsible German equities ETF that screens out companies from the widely followed DAX Index based on environmental, social, and governance (ESG) criteria.
The fund will offer a socially responsible alternative to the €3.8bn Xtrackers DAX UCITS ETF.
The Xtrackers DAX ESG Screened UCITS ETF will cater to investors seeking a sustainable alternative to the €3.8bn Xtrackers DAX UCITS ETF.
The fund will not be a brand new ETF but rather is being created by repurposing the €440 million Xtrackers DAX Income UCITS ETF which currently also tracks the DAX Index.
On 20 June 2022, the fund will switch its name and will begin tracking the DAX ESG Screened Index.
The incoming index starts its construction process from the DAX Index which consists of 40 blue-chip companies trading on the Frankfurt Stock Exchange.
It then utilizes ESG exclusion filters based on data provided by Institutional Shareholder Services (ISS) to remove violators of international norms, companies with any revenue exposure to controversial weapons, and firms that do not meet a minimum ESG rating requirement.
Additionally, the methodology utilizes a series of additional business activity screens to remove companies deriving revenue above certain thresholds from activities linked to tobacco, thermal coal mining, oil sands, nuclear power, civilian firearms, and military equipment.
Companies removed through the above filters are not replaced and, therefore, the DAX ESG Screened Index will typically have fewer holdings than the 40 stocks contained within the DAX.
Constituents in the index are weighted by market capitalization while capping the weight of any single company at 10%.
As of the end of April, the index’s largest sector exposures were chemicals (16.7%), pharma & healthcare (13.2%), insurance (11.8%), automobiles (11.5%), and industrials (9.5%). These sector allocations were broadly in line with the DAX.
Notable positions included Linde (10.4%), SAP (8.3%), Siemens (7.5%), Allianz (7.0%), and Airbus (5.1%).
No change will be made to the ETF’s expense ratio of 0.09%. The fund is currently listed on Xetra in euros (XDDX GY) and on the London Stock Exchange in pound sterling (XDDX LN). USD-hedged and CHF-hedged share classes, which cost 0.19%, are available on SIX Swiss Exchange under the tickers XDUD SW and XDCH SW, respectively.
Several other ETF issuers in Europe also offer ESG-tailored DAX ETFs including Amundi, Lyxor, Credit Suisse, and BlackRock. The largest of these is currently the €200m Lyxor 1 DAX 50 ESG (DR) UCITS ETF (E909 GY).