Industry Updates

DWS corporate bond ETF goes ‘dark green’ Paris aligned

The underlying index will PAB criteria

Theo Andrew

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The DWS short-duration corporate bond ETF will be upgraded from ‘light’ to ‘dark green’ after its underlying index was changed to incorporate Paris-aligned benchmark (PAB) criteria.

From 1 November, the Xtrackers II ESG EUR Corporate Bond Short Duration UCITS ETF (XZE5) will change from tracking the Bloomberg MSCI Euro Corporate Sustainable and SRI 0-5 Year index to the Bloomberg MSCI Euro Corporate SRI 0-5 Year PAB index.

Following the changes, the £392m ETF will be renamed the Xtrackers II EUR Corporate Bond Short Duration SRI PAB UCITS ETF under the same ticker and total expense ratio (TER) of 0.16%.

In a shareholder notice, DWS said the ETF will be upgraded from Article 8 to Article 9 under the Sustainable Finance Disclosure Regulation (SFDR).

As per PAB requirements, the new index will set an initial 50% decarbonisation target of absolute greenhouse gas emissions relative to the parent index, followed by an annual 7% decarbonisation trajectory of absolute greenhouse emissions.

Additional ESG criteria will be set, excluding bond issuers where MSCI does not have reported or greenhouse emissions data and issuers who breach an MSCI environmental controversy score.

The move by the German asset manager follows several issuers that have upgraded their ETFs to Article 9 following a switch to a PAB index.

In August, Fidelity proposed to add a Paris-aligned benchmark to its corporate bond ETF, the Fidelity Sustainable Global Corporate Bond UCITS ETF (FSMF).

DWS has been expanding its PAB range in recent months, following a triple launch of US, European and Japanese equity ETFs.

In August, new DWS CEO Stefan Hoops hit back at media coverage surrounding the group’s greenwashing allegations.

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