Xtrackers by DWS has created a new offering with an ETF designed to provide ESG derived exposure to short duration US dollar investment-grade corporate bonds.
The Xtrackers ESG USD Corporate Bond Short Duration UCITS ETF tracks the Bloomberg MSCI USD Corporate Sustainable and SRI 0-5 Years Index, which reflects the performance of over 1,000 investment-grade, US dollar-denominated, short-duration corporate bonds (with at least one month and up to but not including five years to maturity) excluding securities which do not fulfil specific ESG criteria.
It has an indicative yield to maturity of around 2.11 per cent and modified duration of 2.4 years (Source: BlackRock Aladdin, as of February 15, 2022). The index implements strict ESG filters in line with MSCI’s SRI (socially responsible investing) methodology, thereby excluding companies that are rated BB or below by MSCI ESG Research, issuers with an MSCI ESG Controversies score of less than one, those classified as breaching certain thresholds in controversial activities, and companies that have involvement in the defence sector. This leads to the removal of approximately 30 per cent of issuers from the original index (Source: Bloomberg, as of February 1, 2022).
The ETF was created by replacing the index of the existing Xtrackers iBoxx USD Corporate Bond Yield Plus UCITS ETF. The index change also sees a reduction in the ETF’s annual all-in fee from 0.25 per cent to 0.16 per cent per annum. The fund currency is USD and there is also a EUR-hedged variant (the annual all-in fee for the EUR-hedged share class is 0.21 per cent).
“Investors can now access high quality short duration ESG USD corporate bond exposure via a competitively priced Xtrackers ETF. We’re pleased to expand our ESG product suite further to meet that demand with this exposure. The addition of ESG filters creates a quality bias, helping improve the product’s risk profile at a moderate cost to yield,” says Michael Mohr, Head of Passive Products, DWS.