DWS has launched an ESG version of its four-strong global equity factor ESG range.
The ETFs which cover minimum volatility, momentum, quality and value are listed on the Deutsche Boerse and the London Stock Exchange with total expense ratios (TER) of 0.25%.
Tracking MSCI indices, the ETFs will use low carbon metrics with a socially responsible investing tilt to capture large and mid-cap companies from industrialised countries.
The ETFs are:
Xtrackers MSCI World Minimum Volatility ESG UCITS ETF (XWEB)
Xtrackers MSCI World Momentum ESG UCITS ETF (XWEM)
Xtrackers MSCI World Quality ESG UCITS ETF (XWEQ)
Xtrackers MSCI World Value ESG UCITS ETF (XWEV)
The selection and weighting of companies will then be determined via MSCI’s factor approach.
For example, XWEB will look to minimise risk on the downside, while XWEM will select stocks that have achieved above average price performance over the past six to 12 months.
Meanwhile, XWEQ will use quality metrics including return on equity, debt to equity and net earnings movement. XWEV identifies companies classified as undervalued using its price/book ratio, price/earnings ratio, earnings forecasts and operating cash flow.
Companies with an MSCI ESG rating of BB or lower or that are active in business areas such as nuclear weapons, tobacco, alcohol, gambling, fossil fuel extraction and thermal coal are excluded.
Those that do not comply with the United Nations Global Compact principles will also be excluded from the index.
Furthermore, index constituents will be selected using an optimisation approach, considering climate, environmental or social objectives including a reduction of greenhouse gases of 30% relative to the parent index and a 50% reduction in active fossil fuel exposure.
The ESG ETFs are listed at the same price as their non-sustainable counterparts, which collectively house £2.7bn assets under management.
It is the group’s latest launch since the German asset manager unveiled the Xtrackers J.P. Morgan EM Local Government Bond UCITS ETF (XEML) in May.