DWS has expanded its line-up of Paris-aligned climate ETFs in Europe with a new fund targeting equities listed in the Nordic region.
DWS is one of the first ETF issuers in Europe to offer Paris-aligned exposure to Nordic equities.
The Xtrackers Nordic Net Zero Pathway Paris Aligned UCITS ETF (XNZN GY) has been listed on Deutsche Börse Xetra in euros.
The fund comes with an expense ratio of 0.15% and is classified as an Article 8 product under the European Union’s Sustainable Finance Disclosure Regulation (SFDR).
DWS offers a further six Paris-aligned equity ETFs focused on stocks from global, US, European, eurozone, Japanese, and emerging market universes.
They are the Xtrackers World Net Zero Pathway Paris Aligned UCITS ETF (XNZW GY), which has an expense ratio of 0.19%; Xtrackers USA Net Zero Pathway Paris Aligned UCITS ETF (XNUS GY), 0.10%; Xtrackers Europe Net Zero Pathway Paris Aligned UCITS ETF (XEPA GY), 0.15%; Xtrackers EMU Net Zero Pathway Paris Aligned UCITS ETF (XNZE GY), 0.15%; Xtrackers Japan Net Zero Pathway Paris Aligned UCITS ETF (XNJP GY), 0.15%; and Xtrackers Emerging Markets Net Zero Pathway Paris Aligned UCITS ETF (XEMN GY), 0.20%.
Methodology
The new ETF tracks the Solactive ISS ESG Nordic Investable Universe Net Zero Pathway Index which is based on an initial universe comprising large and mid-cap stocks from Sweden, Denmark, Finland, and Norway.
The methodology first screens out violators of international principles, companies with very low overall ESG scores, firms deemed to be hampering certain UN Sustainable Development Goals, and issuers with business activities linked to coal mining, fossil fuels, oil sands, tobacco, and weapons.
The index then weights the remaining constituents in order to satisfy the requirements for an EU Paris Aligned Benchmark (PAB), aligning with a trajectory to limit global warming to 1.5°C above pre-industrial levels by 2050. Specifically, the index uses an optimization process to deliver an immediate 50% reduction in weighted average carbon intensity compared to the initial universe as well as a 7% annual decarbonization going forward.
The index goes beyond the PAB requirement, however, incorporating recommendations from the Institutional Investors Group on Climate Change (IIGCC) to ensure that climate metrics are the primary driver of active company weights.
Based on the IIGCC’s recommendations, the index then further tilts constituent weights in favour of companies that have adopted science-based emissions targets, those that maintain high climate disclosure standards, and those that generate significant green revenues.
In October 2022, DWS also unveiled four Paris-aligned fixed income ETFs that target broad maturity or shorter-duration exposures within USD or EUR investment-grade corporate credit markets.