DWS is switching the index and strategy on its global ex UK ETF to one that tracks emerging markets with an ESG screen.

The Xtrackers FTSE All-World ex UK UCITS ETF (XDEX) is set to move from tracking the FTSE All-World ex UK index to the MSCI EM Select ESG Screened index and will be renamed the Xtrackers MSCI Emerging Markets ESG Screened UCITS ETF under the same ticker.

As a result of the change, XDEX will see its total expense ratio (TER) halved from 0.40% to 0.20% and will be classified as Article 8 under the Sustainable Finance Disclosure Regulation (SFDR).

The switch was first announced in October but was delayed indefinitely to ensure all “operational aspects of the new tracking arrangement” were in place, despite winning shareholder approval.

As well as switching to an ESG focused index, the change marks a complete overhaul for XDEX which has been one of the biggest players in the ESG switching frenzy over the past year.

The ETF will completely ditch its 61.1% holding of US securities while upping its weight in China from 3.2% to 32%. Elsewhere, Taiwan will become the second-largest weighting (17.5%) followed by South Korea (12.5%) and India (12.1%).

From a sector perspective, technology remains the largest weighting at 23.4%. Financials will see the biggest increase from 14.6% to 22.7% while industrials and healthcare will fall from 12.7% and 11.2%, respectively, to around 4% each.

Furthermore, the ESG screened index will exclude companies that breach revenue thresholds in controversial activities including tobacco, conventional weapons, nuclear weapons, civilian firearms, thermal coal and oil sands.

DWS added securities lending transactions undertaken by the ETF will comply with ESG standards.

Last August, DWS added an ESG filter to nine of its Europe sector ETFs along with swapping index providers from STOXX to MSCI. The firm can engage in securities lending with this range.

Earlier this month, DWS launched two Paris-aligned climate ESG ETFs, the Xtrackers EMU Net Zero Pathway Paris Aligned UCITS ETF (XNZE) and the Xtrackers World Net Zero Pathway Paris Aligned UCITS ETF (XNZW).

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