Industry Updates

DWS switches UK equity ETF to ESG index

The German asset manager is the latest ETF issuer to switch from core FTSE Russell to MSCI's core ESG indices

Tom Eckett

a sign with trees in the background

DWS has become the latest ETF issuer to move the index of an equity ETF to one that incorporates environmental, social and governance (ESG) metrics, ETF Stream can reveal.

The $36.8m Xtrackers FTSE All-Share UCITS ETF (XASX) has been renamed the Xtrackers MSCI UK ESG UCITS ETF under the same ticker.

Instead of tracking the FTSE All-Share, XASX will now track the MSCI UK IMI Low Carbon SRI Leaders Select index which offers exposure to large, mid and small cap UK equities with low carbon and high ESG scores.

Along with the change of index, the German ETF issuer has dropped the total expense ratio (TER) by two basis points to 0.18%.

Furthermore, instead of implementing an optimised sampling methodology to track the index, XASX will be fully replicated and there will no longer be any securities lending in line with the firm’s other ESG ETFs.

Simon Klein, global head of passive sales at DWS, commented: “We have seen exceptional flows into ESG exposures this year, and expect that demand to continue into 2021.

“We have been focused therefore on ensuring our product suite serves the needs of our increasingly ESG-focused investors. This is an important new addition to that product line up.”

The move follows Amundi which has moved two equity ETFs to ESG indices earlier this year highlighting the rapidly growing demand for sustainable strategies.

In October, the French asset manager switched its physically-replicated S&P 500 ETF to the S&P 500 ESG index while renaming the strategy the Amundi S&P 500 ESG UCITS ETF (S500) before dropping its FTSE 100 ETF for an MSCI ESG index later in the same month.

As a leader in ESG, this trend of changing core indices in order to incorporate ESG metrics could be a big win for MSCI which has now captured three ETFs and around $1bn assets from FTSE Russell.

DWS is one of a number of ETF issuers in Europe making a push in both the equity and fixed income ESG spaces.

In September, the firm launched two fixed income ESG ETFs, the Xtrackers ESG USD Corporate Bond UCITS ETF (XZBU) and the Xtrackers MSCI World ESG UCITS ETF EUR – Hedged (XZWE).

Featured in this article