DWS has introduced a new suite of equity ETFs in Europe that are tailored for climate-conscious investors.
Simon Klein, Global Head of Passive Sales at DWS.
The Xtrackers Net Zero Pathway ETFs initially consist of two funds providing exposure to global developed and eurozone equity markets.
The Xtrackers World Net Zero Pathway Paris Aligned UCITS ETF has been listed on London Stock Exchange in US dollars (Ticker: XNZW LN) and pound sterling (XNZS LN) as well as on Xetra in euros (XNZW GY). The fund comes with an expense ratio of 0.19%.
The Xtrackers EMU Net Zero Pathway Paris Aligned UCITS ETF, meanwhile, is listed on LSE in pound sterling (XNZE LN) and on Xetra in euros (XNZE GY). Its expense ratio is slightly lower at 0.15%.
The ETFs track Solactive ISS ESG Net Zero Pathway indices which satisfy the requirements of the EU’s Paris Aligned Benchmark (PAB) regulation, aligning with a trajectory to limit global warming to 1.5°C above pre-industrial levels.
The indices go beyond the PAB requirement, however, incorporating recommendations from the Institutional Investors Group on Climate Change (IIGCC) to ensure that climate metrics are the primary driver of active company weights.
The indices begin with broad universes of global developed or eurozone equities, first screening 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 indices then weight the remaining constituents in order to satisfy the EU’s PAB requirement. This translates to an immediate 50% reduction in weighted average carbon intensity compared to the initial universe as well as a 7% annual decarbonization going forward.
Based on the IIGCC’s recommendations, the indices then further tilt constituent weights in favour of companies that have adopted science-based emissions targets, that maintain high climate disclosures standards, and that generate significant green revenues.
Simon Klein, Global Head of Passive Sales at DWS, said: “These are the first Paris Aligned Benchmark ETFs to implement the recommendations from the IIGCC and, as such, serve the needs of investors who increasingly want to align their investment portfolios with ambitious climate targets but also play an active role in bringing about change at the corporate level. By basing our ETFs on this robust, engagement-friendly indexing protocol, investors in these Xtrackers ETFs can place their actions at the cutting edge of sustainable investment practices.”
Both ETFs are classified as Article 9 products under the EU’s Sustainable Finance Disclosures Regulation (SFDR).