DWS has entered the green bond exchange traded fund (ETF) space with the launch of two Xtrackers ETFs that provide investors with access to the rapidly growing market for green corporate bonds.
Simon Klein, DWS’s Global Head of Passive Sales
- Xtrackers breaks new ground with UCITS ETFs referencing indices specifically designed to target green corporate bonds
- Exposure to investment grade green bonds via indices structured to meet the EU’s Article 9 Sustainable Finance Disclosure Regulation requirements
- Quintet Private Bank serves as seed investor and will use the ETFs in their discretionary portfolios
Until now, the UCITS green bond ETF area has been dominated by products targeting the broad green bond segment, resulting in substantial allocations to sovereign and supra-national debt, but in a breakthrough development the new Xtrackers ETFs specifically target the green corporate bond market.
The Xtrackers EUR Corporate Green Bond UCITS ETF and Xtrackers USD Corporate Green Bond UCITS ETF listed today on Deutsche Bӧrse. The ETFs use physical replication and track newly developed Bloomberg Barclays indices that use MSCI ESG Research data to assess the credentials of eligible debt based on Green Bond Principles criteria.
To qualify for the index, bonds must be rated investment grade and proceeds have to be designated to the financing of climate and environmental projects. Eligible issuers must satisfy ESG (environmental, social and governance) criteria related to MSCI ESG ratings, business involvement and controversies filters. The indices align with DWS ESG standards and have been designed to meet the Article 9 classification under the European Union’s Sustainable Finance Disclosure Regulation*, which means they qualify as funds that specifically have sustainability as their investment objective.
“Green bond issuance is booming, but most green bond indices are biased towards sovereign and supra-national debt. The new Xtrackers US dollar and EUR green bond ETFs have been constructed to provide investors with exposure to the corporate and corporate-related agency bond segment of this rapidly developing market. This provides corporate bond investors with a compelling alternative to traditional and ESG offerings,” said Michael Mohr, DWS Head of Passive Product Development.
Quintet, the Luxembourg headquartered private bank, is seed investor in the ETFs and will deploy the products in their discretionary portfolios. The bank worked closely with DWS during the product development phase to ensure the ETFs reflect investor preferences.
“We are committed to making sustainability the default approach for all our clients,” said James Purcell, Group Head of Sustainable Investment at Quintet. “That includes working with a globally leading group like DWS to provide innovative products that meet client needs and help address the urgent climate challenge.”
Both ETFs have an annual all-in fee (total expense ratio) of 0.25%. A EUR-hedged share class of Xtrackers USD Corporate Green Bond UCITS ETF has also listed.
|ETF name||Xtrackers EUR Corporate Green Bond UCITS ETF||Xtrackers USD Corporate Green Bond UCITS ETF||Xtrackers USD Corporate Green Bond UCITS ETF|
|Index||Bloomberg Barclays MSCI EUR Corporate and Agency Green Bond Index||Bloomberg Barclays MSCI USD Corporate and Agency Green Bond Index||Bloomberg Barclays MSCI USD Corporate and Agency Green Bond Index|
|Share Class||1C: EUR | Accumulating||2C: USD | Accumulating||1C: EUR-hedged | Accumulating|