Industry Updates

DWS to switch Europe mid-cap ETF to ESG index and slash fees

The German asset manager has more than halved the TER of the ETF

Theo Andrew

ESG impact seed funding

DWS is set to change the index of its Europe mid-cap ETF to one that incorporates environmental, social and governance (ESG) metrics while also slashing fees on the product.

Effective 20 October, the £39.6m Xtrackers MSCI Europe Mid Cap UCITS ETF (XEUM) has been renamed the Xtrackers MSCI Europe ESG Screened UCITS ETF.

In addition, DWS has more than halved the total expense ratio (TER) from 0.25% to 0.12%.

Instead of tracking the MSCI Europe Mid Cap index, XEUM will replicate the MSCI Europe Select ESG Screened index which offers exposure to the large and mid-cap equities that meet certain minimum ESG standards.

It will exclude companies that are involved in controversial weapons or breach revenue thresholds from activities including tobacco, conventional weapons, nuclear weapons, civilian firearms, thermal coal and oil sands extraction.

Companies that fail to comply with the United Nations Global Compact principles or that are assigned an MSCI ESG rating of CCC or below will also be excluded.

XEUM will fully engage with securities lending with the German asset manager adding that all collateral it receives from the practice will comply with its ESG standards.

“The change to the 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,” the group stated in a market announcement last week.

“Hence, the board of directors deems it to be in the best interests of the shareholders to restructure the ETF to reflect the index.”

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

In December last year, the issuer renamed the Xtrackers FTSE All-Share UCITS ETF (XASX) to the Xtrackers MSCI UK ESG UCITS ETF under the same ticker.

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