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DWS launches high yield corporate and government bond ESG ETFs

Second sovereign bond ESG ETF launched by DWS

Theo Andrew

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DWS has launched two fixed income ESG ETFs tracking high-yield corporate bonds and eurozone government bonds.

The Xtrackers ESG Eurozone Government Bond UCITS ETF (XZEB) and the Xtrackers ESG EUR High Yield Corporate Bond UCITS ETF (XZHE) are listed on the Deutsche Boerse with total expense ratios (TERs) of 0.15% and 0.25%, respectively.

XZHE, which tracks the Bloomberg MSCI Euro High Yield Sustainable and SRI index, is also listed on the London Stock Exchange.

It tracks the performance of the euro-dominated high-yield corporate bonds that meet certain size and liquidity conditions, while also being subject to several ESG filters, excluding those without a rating from MSCI ESG Research or those rated lower than BB.

Companies involved in controversial weapons, fossil fuels or nuclear weapons are also excluded.

Meanwhile, XZEB tracks the FTSE ESG Select EMU Government Bond index which applies more stringent criteria to give a higher weighting to countries with better ESG characteristics.

The index also excludes countries with the “worst” ESG scores and countries not considered to be “free” based on an annual assessment by the Freedom House organisation.

Each country will be ranked on E, S and G factors including climate protection, inequality, health and social justice, government corruption and political stability.

Commenting on the launches, Michael Mohr, head of passive products at DWS, said: “DWS is adding important investment segments to our range of bond ESG ETFs.

“We now offer investors ETFs for corporate and government bonds with different credit ratings, currencies and regional delineations based on a coordinated ESG rulebook.”

XZEB is the second sovereign bond ESG ETF launched by DWS after it unveiled the Xtrackers ESG Global Government Bond UCITS ETF (XZWG) in January.

Has DWS’s latest ETF launch squared the sovereign bond ESG circle?

DWS has continued to green up its portfolio in recent months, primarily through index switches that have seen it tighten the ESG screens on many of its ETFs.

However, the company has been plagued by allegations of greenwashing in recent weeks which led to its former CEO Asoka Woehrmann to step down hours after a police raid on its offices.

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