Financial powerhouse DWS announces the introduction of two Exchange-Traded Funds (ETFs) focused on green corporate bonds.
In a significant move towards sustainable investing, DWS, the German asset manager, has launched two new Exchange-Traded Funds (ETFs) - Xtrackers EUR Corporate Green Bond UCITS ETF and Xtrackers USD Corporate Green Bond UCITS ETF. These ETFs, listed on the German Stock Exchange today, aim to provide investors with exposure to the private sector's green bond market.
The issuers of the index components for these ETFs must meet certain Environmental, Social, and Governance (ESG) criteria, ensuring a sustainable approach in terms of the environment, social responsibility, and good corporate governance. The green bond principles, formulated in 2014, serve as a benchmark for the sustainability of the ETFs.
Quintet, a Luxembourg-based private bank, acts as seed investor for both ETFs, providing both seed investment and product development contributions. The new ETFs replicate newly developed Bloomberg-Barclays indices and are physically replicated, according to DWS.
The bonds included in the indices have investment-grade ratings and are issued by the private sector, a departure from the predominant state or supranational issuers in the green corporate bond market. The proceeds of the bonds are intended to finance climate or environmental projects such as renewable energy, energy efficiency, sustainable water management, clean transportation, green buildings, and climate change adaptation.
Michael Mohr, who heads passive product development at DWS, explains this focus. "We believe that private sector investment is crucial in driving the transition to a low-carbon economy. These ETFs provide investors with an opportunity to support this transition while earning a return on their investment."
The ETFs, despite their focus on the private sector, continue to adhere to the green bond principles and ESG criteria. The issuers must provide clear, regular reporting on the use of proceeds, project selection, and environmental impact. Many green bond ETFs require independent verification or certification to confirm the green credentials of the bond.
It is worth noting that the exact, legally binding criteria for these ETFs are not specified in the available search results. For full transparency and compliance, investors are advised to refer to the fund’s latest offering documents.
The growth of ESG-labeled UCITS funds in Europe is driven by regulatory standards, but these do not prescribe specific issuer criteria - only require disclosure and alignment with sustainable objectives.
The indices for the new ETFs are constructed to meet the requirements for funds under Article 9 of the EU Disclosure Regulation, which requires funds to achieve and demonstrate a certain sustainability impact. Critical sectors are excluded from the ETFs.
This move by DWS marks a significant step in the expansion of sustainable investing, offering investors a new avenue to support climate action and the transition to a low-carbon economy.
- Economic and social policy concerning the green transition is furthered by DWS's new ETFs, as they aim to provide investing opportunities in the private sector's green bond market, adhering to Environmental, Social, and Governance (ESG) criteria.
- In the process of expanding sustainable investing, DWS's new ETFs not only follow green bond principles but also focus on finance related to climate or environmental projects through technology, such as renewable energy, energy efficiency, and sustainable water management.
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