DWS cuts fees for revamped global bond ESG ETF

Reduced fees due to “high entries” over the past two years

DWS cut fees for its global bond ETF after replacing the index with one that tracks ESG metrics.

The €570 million Xtrackers Global Aggregate Bond Swap UCITS ETF (XBAG), which will be renamed Xtrackers ESG Global Aggregate Bond UCITS ETF under the same ticker, will see its total expense ratio (TER) reduced from 0.15% to 0 10% in primary. share class 1D and 0.20% to 0.15% in the remaining share classes.

This comes after DWS announced last November that XBAG would switch from tracking the Bloomberg Global Aggregate Bond Index to the Bloomberg MSCI Global Aggregate Sustainable and SRI Currency Neutral Index, due to weak investor demand.

He said the TER cut had been made “to pass on the cost benefits of high entries to investors” since it was launched in 2014.

Additionally, XBAG’s index replication will also switch from synthetic to physical. The ETF will be classified under Article 8 of the Sustainable Financial Disclosure Regulation.

DWS has confirmed that there will be no securities lending on the product.

XBAG will exclude issuers that do not meet specific ESG requirements, including those with insufficient MSCI ESG ratings, those deemed highly controversial and companies whose activities are “incompatible with certain social responsibility criteria”.

It will also exclude issuers that generate more than 0% revenue from thermal coal, oil and gas or 10% from tobacco.

In addition, it will exclude all emitters that generate more than 10% or more of their electricity from thermal coal or 30% from nuclear.

Simon Klein, Head of Passive Sales at DWS, said: “In our view, XBAG offers a very attractive combination for investors who want to track the entire investment-grade bond market with a single ETF, while complying strictly to sustainability criteria.

“This is a very good example of how we continue to develop our ETFs to meet investors’ needs.”

DWS is the second ETF issuer in Europe to offer exposure to a global aggregate bond index with an ESG slant. Last August, BlackRock launched the iShares Global Aggregate Bond ESG UICTS (AGGE) ETF which tracks the Bloomberg MSCI Global Aggregate Sustainable and Green Bond SRI Index.

This is one of several ESG index changes the German asset manager has undertaken across its equity and fixed income ranges.

In January, the company proposed a sustainable index change to the Xtrackers iBoxx USD Corporate Bond Yield Plus UCITS ETF (XYLD).

This was followed a month later by the announcement of a tightening of the exclusion criteria on three ESG corporate bond ETFs to ensure that a certain percentage of companies in the investment universe are excluded.

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