Industry Updates

DWS delays ESG index switch for global ex UK ETF

Delay is to ensure all “operational aspects” are in place

Theo Andrew

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DWS is delaying planned fee cuts and index switch on one of its ETFs to an index that track environmental, social and governance (ESG) metrics, ETF Stream can reveal.

Originally, the £104m Xtrackers JPX-Nikkei Index 400 UCITS ETF (XDNY) and the £42m Xtrackers FTSE All-World ex UK UCITS ETF (XDEX) were planned to swap to ESG-screed indexes on 20 October after receiving shareholder approval last week.

While the XDNY index change and fee cut will go ahead as planned, XDEX's changes will be delayed until further notice to ensure all "operational aspects" are in place.

As part of the changes, the total expense ratio (TER) on XDNY is set to be cut from 0.18% to 0.15% while XDEX fees will be halved from 0.40% to 0.20%.

A DWS spokesperson told ETF Stream: “The delay in implementing the benchmark change is to ensure all operational aspects of the new tracking arrangement is in place, ensuring a smooth transition.”

Under the proposed changes, XDNY will track the MSCI Japan Select ESG Screened Index as opposed to the JPX-Nikkei 400 Net Total Return index and will change its name to Xtrackers MSCI Japan ESG Screened UCITS ETF under the same ticker.

In a slightly broader step change, XDEX will change from tracking the FTSE All-World Ex UK index to the MSCI EM Select ESG Screened index and will trade under the name Xtrackers MSCI Emerging Markets ESG Screened UCITS ETF.

As a result, the ETF will undergo a complete overhaul, binning its 58.5% weighting to the US and upping its exposure to China from 4% to 34.2%.

Both new ESG screened indices will exclude companies that breach revenue thresholds in controversial activities including tobacco, conventional weapons, nuclear weapons, civilian firearms, thermal coal and oil sands.

DWS said it would announce a date for XDEX changes “in due course”.

The changes are part of a wider trend by the issuer which has changed to a more focused-ESG index on several of its ETFs over the past couple of months.

In August, DWS added an ESG filter to nine of its Europe sector ETFs along with swapping index providers from STOXX to MSCI. They became the first ESG ETFs in Europe to engage in securities lending.

Last month, the group said it was changing the index of the £39.6m Xtrackers MSCI Europe Mid Cap UCITS ETF (XEUM), renaming it the Xtrackers MSCI Europe ESG Screened UCITS ETF and halving its TER in the process.

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