DWS is set to add an ESG filter to nine Europe sector ETFs along with swapping the index provider from STOXX to MSCI.

In a note to investors, DWS said the nine ETFs will become fully replicated and can engage with securities lending making it one of the first ESG ETFs in Europe to do so.

The German asset manager added the collateral it receives from securities lending will comply with the firm’s ESG standards.

The ETFs offer exposure to financials, materials, consumer staples, health care, industrials, communication services, utilities, energy and technology.

Current ETF name

New ETF name

Xtrackers Stoxx Europe 600 Banks Swap UCITS ETF (XS7R)

Xtrackers MSCI Europe Financials ESG Screened UCITS ETF

Xtrackers Stoxx Europe 600 Basic Resources Swap UCITS ETF (XSPR)

Xtrackers MSCI Europe Materials ESG Screened UCITS ETF

Xtrackers Stoxx Europe 600 Food & Beverage Swap UCITS ETF (XS3R)

Xtrackers MSCI Europe Consumer Staples ESG Screened UCITS ETF

Xtrackers Stoxx Europe 600 Health Care Swap UCITS ETF (XSDR)

Xtrackers MSCI Europe Health Care ESG Screened UCITS ETF

Xtrackers Stoxx Europe 600 Industrial Goods Swap UCITS ETF (XSNR)

Xtrackers MSCI Europe Industrials ESG Screened UCITS ETF

Xtrackers Stoxx Europe 600 Telecommunications Swap UCITS ETF (XSKR)

Xtrackers MSCI Europe Communication Services ESG Screened UCITS ETF

Xtrackers Stoxx Europe 600 Utilities Swap UCITS ETF (XS6R)

Xtrackers MSCI Europe Utilities ESG Screened UCITS ETF

Xtrackers Stoxx Europe 600 Oil & Gas Swap UCITS ETF (XSER)

Xtrackers MSCI Europe Energy ESG Screened UCITS ETF

Xtrackers Stoxx Europe 600 Technology Swap UCITS ETF (XS8R)

Xtrackers MSCI Europe Information Technology ESG Screened UCITS ETF

They now will exclude companies associated with controversial weapons and tobacco, derive revenues from thermal coal and oil sands extractions, have an MSCI ESG rating of CCC or are not in line with the United Nations Global Compact principles.

As a result, each ETF has been classified as Article 8 under the Sustainable Finance Disclosure Regulation (SFDR).

Instead of tracking the respective STOXX indices, the ETFs will replicate the sector version of the MSCI Europe ESG Screened 20-35 Select index.

These indices implement an individual stock cap of 35% for the largest holding and 20% for the remaining stocks in order to avoid concentration risks.

Barring XSER and XS8R, each ETF caps the largest holding at 31.5% while all others are capped at 18% to give a 10% buffer to MSCI’s weighting methodology. XSER and XS8R have a 20% buffer.

The changes will take place between 1 September and 30 November.

As part of the huge shift to ESG ETFs, issuers have been repurposing strategies to incorporate ESG metrics.

Last December, DWS moved its UK ETF, the Xtrackers FTSE All-Share UCITS ETF (XASX), to the MSCI UK IMI Low Carbon SRI Leaders Select index and renamed it the Xtrackers MSCI UK ESG UCITS ETF.

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