Market Overview

Another ESG ETF Is Here

Another ESG ETF Is Here

The universe of exchange traded funds targeting environmental, social and governance continues growing. DWS, the asset management and ETF arm of Deutsche Bank AG (USA) (NYSE: DB) launched the Xtrackers MSCI EAFE ESG Leaders Equity ETF (NYSE: EASG) on Wednesday.

EASG is the fifth ETF launched this year by DWS.

What Happened

The new ETF follows the MSCI EAFE ESG Leaders Index, the ESG answer to the widely followed MSCI EAFE Index.

“The index is designed to provide exposure to companies with high environmental, social and governance performance relative to their sector peers,” according to DWS.

Why It's Important

Applying ESG standards to many traditional equity benchmarks often results in a reduced number of holdings for the relevant ESG funds. For example, the new EASG is home to 453 stocks, less than half the number of components in the MSCI EAFE Index.

Sector-level differences are not always significant. EASG allocates a combined 46.46 percent of its weight to the financial services, industrial and consumer discretionary sectors. Those are also the top three sector weights in the MSCI EAFE Index, combining for 45.95 percent of that benchmark's weight.

EASG's top three country weights are Japan, the U.K. and France, to the tune of 46.4 percent. Those countries combine for 52.29 percent of the MSCI EAFE Index. EASG includes large- and mid-cap stocks from developed markets excluding the U.S. and Canada.

What's Next

“More than one-quarter of assets under management globally are now being invested according to the premise that ESG factors can materially affect a company’s performance and market value,” Fiona Bassett, global co-head of passive asset management and products for DWS, said in a statement.

EASG charges 0.14 percent per year, or $14 on a $10,000 investment, making it one of more cost-effective ESG funds currently on the market.

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