Industry Updates

DWS plans to switch two Asia ETFs to ESG indices

Emerging markets Asia and Asia ex Japan ETFs set to switch

Theo Andrew


DWS is planning to switch the index on two Asia-focused ETFs to ones that track ESG metrics.

In a shareholder notice, the German asset manager proposed the switch on the Xtrackers MSCI EM Asia Swap UCITS ETF (XMAS) and the Xtrackers AC Asia ex Japan Swap UCITS ETF (XAXJ).

XMAS will go from tracking MSCI Total Return Net Emerging Markets Asia index to the MSCI Emerging Markets Asia Select ESG Screened index while XAXJ will switch from tracking the MSCI AC Asia ex Japan TRN index to the MSCI AC Asia ex Japan Low Carbon SRI Leaders Capped index.

As a result, both ETFs will have ESG added to their names while the total expense ratios (TERs) – 0.65% for both products – and respective tickers will remain the same.

Following the change, XMAS will take a screened approach, excluding companies that do not fulfil specific ESG criteria such as those assigned with an MSCI ESG rating of CCC or below, companies associated with controversial, civilian, conventional and nuclear weapons and tobacco.

Companies that derive revenues from thermal coal and oil sand extraction and those not compliant with the United Nations Global Compact principles will also be excluded.

XAXJ will take a more rules-based approach, selecting companies based on MSCI’s low carbon exposure selection and highest ESG performance selection rules.

“As a result, the sub-fund may be more heavily weighted in securities, industry sectors or countries that underperform the market as a whole or underperform other funds screened for ESG standards, or which do not screen for such standards,” the firm said.

Both ETFs will be labelled Article 8 under the Sustainable Financial Disclosure Regulations (SFDR).

The latest proposals follow several switches to ESG indices the German asset manager has undertaken across its equity and fixed income ranges.

Commenting on the proposals, DWS said: “The change to the new reference index is proposed as part of the company’s continuous review of its existing product range and due to increased demand for ESG compliant investments.

“Hence, the board of directors deems it to be in the best interests of the shareholders to restructure the sub-fund to reflect the new reference index.”

Last month, the issuer cut fees on the Xtrackers ESG Global Aggregate Bond UCITS ETF (XBAG) having switched to an ESG index.

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