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DWS expands Xtrackers S&P 500 offering with new ESG ETFs 

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DWS has launched two new Xtrackers ETFs that track the US equity market based on the S&P 500 index while, the firm writes, at the same time taking into account environmental and social standards as well as good corporate governance (ESG). 

DWS is expanding its range of Xtrackers S&P 500 ETFs, which manage more than EUR11 billion (as of Nov. 30, 2022). The Xtrackers S&P 500 Equal Weight UCITS ETF was the first ETF in Europe to track this index when it was launched in 2014.

The Xtrackers S&P 500 ESG UCITS ETF and the Xtrackers S&P 500 Equal Weight ESG UCITS ETF have been listed on Deutsche Boerse and the London Stock Exchange, with additional listings to follow. The S&P 500 Index tracks the 500 largest companies in the US equity market by market capitalisation and is one of the most important equity benchmarks in the world. The S&P 500 Equal Weight Index tracks the same companies but weights all 500 index members equally at 0.2 per cent each.

The newly launched Xtrackers ETFs track indices that consider additional criteria for selecting index members. The S&P 500 ESG Index and the S&P 500 Equal Weight ESG Index initially make a number of exclusions before selecting constituents with a consideration for E, S and G criteria. 

For example, companies that exceed revenue thresholds in activities related to thermal coal, tobacco and controversial weapons, among others are excluded.  In addition, companies are excluded for violating international norms and standards, such as the UN Global Compact Principles. Finally, companies without an S&P DJI ESG score are excluded, as are those who fall within the worst 25 per cent of ESG Scores from each global GICS Industry Group. 

In a second step, index members are listed according to their S&P DJI ESG Score. For the S&P DJI ESG Score, company data is collected and evaluated by S&P Global ESG Research on environmental, social, and corporate governance standards. Both the S&P 500 ESG Index and the S&P 500 Equal Weight ESG Index target a fixed percentage float-adjusted market capitalization (FMC) of the S&P 500 by using the S&P DJI ESG Scores. The S&P 500 ESG index targets 75 per cent of the FMC of the S&P 500 and selects companies in each GICS industry group from the S&P 500 index with the best ESG Score, while for the S&P 500 Equal Weight ESG Index targets 60 per cent FMC using the same process.

As a result, the S&P 500 ESG and S&P 500 Equal Weight ESG Indexes ultimately comprise around 300 stocks instead of the original 500 stocks. The index methodologies are designed to ensure that the ESG indexes achieve a similar industry or sector risk characteristics as the original index, the firm says.

“The importance of ETFs that track the US equity market in conjunction with transparent Environmental, Social and Governance criteria in a portfolio has grown significantly in recent years. We are pleased to further expand our Xtrackers offering for investors with attractive solutions,” says Simon Klein, Global Head of Passive Sales, DWS.

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