DWS Group on Thursday launched the Xtrackers MSCI USA ESG Leaders Equity ETF (USSG), which invests in large- and mid-cap U.S. companies chosen for their high environmental, social and governance (ESG) performance vis-à-vis their sector peers.
The fund’s expense ratio of 0.10 percent makes it the lowest-cost equity ESG ETF, slightly bettering the 0.12 percent fee charged by the Vanguard ESG U.S. Stock ETF (ESGV). It matches the fee on the iShares ESG U.S. Aggregate Bond ETF (EAGG).
It tracks a market cap-weighted index employing MSCI ESG research that examines various aspects to determine which companies make the grade. That includes measuring how well companies manage their ESG risks and opportunities and assigning them an overall ESG rating on a seven-point scale ranging from AAA to CCC. It also assesses ESG-related controversies a company might have, which is defined as an instance or ongoing situation where its operations and/or products allegedly have a negative ESG impact.
In addition, the index excludes companies involved in the alcohol, tobacco, gambling, nuclear power, conventional and controversial weapons and civilian firearms industries.
Top portfolio holdings consist of blue-chip names such as Microsoft Corp., Johnson & Johnson, Alphabet inc., Visa Inc. and Proctor & Gamble Co.
The fund was developed in collaboration with Ilmarinen, Finland’s largest pension insurance company. Ilmarinen says sustainability and ESG considerations are a key part of its investment strategy for pension assets, and the company accounted for the USSG fund’s massive asset base of roughly $844 million in the early going, making it the largest fund launch in the past 15 years, according to DWS Group.
DWS Group is the former asset management unit of Deutsche Bank previously known as Deutsche Asset Management. Its Xtrackers ETF lineup now has 39 products, four of which are ESG-related.