DWS has unveiled a new suite of thematic equity ETFs in Europe targeting companies making positive impacts on specific UN Sustainable Development Goals (SDGs).
DWS has begun rolling out a new series of ‘impact investing’ ETFs that directly support specific UN Sustainable Development Goals.
Adopted by UN member countries in September 2015, the SDGs are a set of 17 goals established to guide international cooperation on issues such as water sanitation, poverty, climate change, and gender equality.
The goals, which are further broken down into 169 measurable targets, seek to promote active participation from governments, corporations, and investors.
DWS has debuted three ETFs within its new suite targeting the ninth, eleventh, and twelfth UN SDGs which relate to industry, innovation & infrastructure, sustainable cities, and the circular economy, respectively.
Each fund tracks an index developed by MSCI that is constructed from the index provider’s flagship global equity benchmark – the MSCI ACWI IMI – which comprises large, mid, and small-cap stocks from both developed and emerging markets.
Each index begins its construction methodology by first excluding companies that are embroiled in severe ESG-related controversies or are proven UN Global Compact violators, as well as firms with business activities linked to controversial and civilian weapons, tobacco, thermal coal, and oil sands.
The remaining stocks are then assigned ESG ratings, based on MSCI‘s seven-point scale from CCC to AAA, which reflect a company’s performance relative to sector peers across a broad range of ESG metrics. Firms with ESG ratings below BB (lower-average) are excluded.
From the screened universe, each index then builds two separate portfolios: an ‘SDG Impact’ portfolio which accounts for 75% of the index’s total weight at rebalance, and an ‘SDG Thematic’ portfolio which accounts for the remaining 25%.
The SDG Impact portfolio consists of stocks that generate at least 50% of their revenue from products and services that directly support the targeted SDG. Constituents within the SDG Impact portfolio are weighted by the product of their float-adjusted market capitalization and their aggregated revenue linked to the targeted SDG.
The SDG Thematic portfolio, meanwhile, consists of stocks that are not part of the SDG Impact portfolio but are deemed to have sufficient linkage to sub-themes related to the targeted SDG. Constituents within the SDG Thematic portfolio are weighted by the product of their float-adjusted market capitalization and a relevance score which indicates the firm’s exposure to the sub-themes.
Industry, innovation & infrastructure
The Xtrackers MSCI Global SDG 9 Industry, Innovation & Infrastructure UCITS ETF has been listed on Deutsche Börse Xetra in euros (SDG9 GY) and on SIX Swiss Exchange in Swiss francs (SDG9 SW).
The fund tracks the MSCI ACWI IMI SDG 9 Industry, Innovation, and Infrastructure Select Index which focuses on companies building resilient infrastructure, promoting broad-based and sustainable industrialization, and supporting innovation.
Companies within the SDG Impact portfolio include those involved in alternative energy, pollution prevention, clean transport infrastructure, industrial automation, demand-side management, SME finance, and next-generation connectivity.
Companies within the SDG Thematic portfolio include those developing new products and services related to robots, artificial intelligence, industrial robots, automation, non-industrial robots, and autonomous robots.
The Xtrackers MSCI Global SDG 11 Sustainable Cities UCITS ETF has also been listed on Xetra in euros (XG11 GY) and on SIX in Swiss francs (XG11 SW).
The fund tracks the MSCI ACWI IMI SDG 11 Sustainable Cities and Communities Select Index which focuses on companies improving the living conditions within cities.
Companies within the SDG Impact portfolio include those involved in pollution prevention, demand-side management, smart grids, clean transport infrastructure, LED/CFL lighting, insulation, green buildings, and affordable real estate.
Companies within the SDG Thematic portfolio include those that are developing smart solutions related to urban infrastructure, buildings, homes, safety & security, mobility, waste & water management, and energy grids.
Finally, the Xtrackers MSCI Global SDG 12 Circular Economy UCITS ETF is also listed on Xetra in euros (XG12 GY) and on SIX in Swiss francs (XG12 GY).
The fund is linked to the MSCI ACWI IMI SDG 12 Responsible Consumption and Production Select Index which focuses on companies that are driving innovation in resource efficiency and supporting the circular economy.
Companies within the SDG Impact portfolio include those involved in alternative energy, energy efficiency, green buildings, sustainable water, pollution prevention, and sustainable agriculture.
Companies within the SDG Thematic portfolio include the top 10% of firms from the parent universe that are exhibiting the best management strategies to protect natural resources and address waste issues. Selection is based on Sector-Relative Management Scores (SRMS) which are computed using the following key metrics: water stress, biodiversity & land use, raw material sourcing, toxic emissions & waste, packaging material & waste, and electronic waste.
Each of the three ETFs comes with an expense ratio of 0.35%. Income is accumulated within the portfolios.
DWS is expected to roll out an additional four ETFs within its SDG suite by the end of the month. Three of the later funds will target the third, sixth, and seventh UN SDGs which relate to good health, clean water & sanitation, and affordable & clean energy, respectively. The fourth, meanwhile, appears to be geared towards delivering diversified exposure across multiple SDGs.