DWS has launched a new thematic equity ETF in Europe providing global infrastructure exposure with an enhanced environmental, social, and governance (ESG) profile.
The ETF provides exposure to a diverse range of infrastructure sectors, selectively excluding those associated with weak sustainability practices.
The Xtrackers Global Infrastructure ESG UCITS ETF has been listed on the London Stock Exchange in pound sterling (Ticker: XIFE LN) and on Deutsche Börse Xetra in euros (XIFE GY).
Infrastructure assets have traditionally offered investors portfolio diversification, consistent income, inflation hedging, and access to stable business models.
The Xtrackers Global Infrastructure ESG UCITS ETF is expected to maintain these key benefits by providing exposure to a diverse range of infrastructure sectors.
The strategy will also, however, aim to capture the robust growth potential associated with worldwide sustainability trends by selectively excluding infrastructure sectors associated with fossil fuels and then tilting towards those with more positive social and environmental outcomes.
The resulting portfolio consists of infrastructure assets that serve the public good by bolstering sustainability practices, reducing climate-related risks, or generating social benefits such as public health improvements and wider access to information. These features may increase the ETF’s appeal to investors interested in achieving financial gains alongside positive environmental and social outcomes.
Michael Mohr, Head of Products at Xtrackers, DWS, commented: “The need for infrastructure beyond fossil fuels is growing rapidly as governments and companies worldwide seek to develop more sustainable infrastructure focused on electrification and computing. The index offers broad, global infrastructure exposure, but its focus is particularly on infrastructure projects that rely on greener technologies.”
Methodology
The fund is linked to the Dow Jones Brookfield Global Green Infrastructure Index which selects its constituents from a broad universe of infrastructure stocks listed in both developed and emerging markets.
The methodology first removes companies embroiled in ESG controversies, firms involved in certain business activities such as controversial weapons and tobacco, and those that exceed revenue thresholds in fossil fuel-based power generation and other non-green activities.
The remaining constituents are weighted using an optimization process that aims to reduce the weighted average carbon intensity of the index by at least 30% relative to the initial universe, improve the overall ESG score, and reduce physical and transition risks associated with climate change.
The index is rebalanced every quarter.
US stocks dominate the index, comprising nearly half (46%) of its total weight. Spain and France each contribute significantly, accounting for 10% of the index, while the UK and Australia hold weights of 9% and 7%, respectively.
Electricity utilities are the most prominent sector within the index, representing approximately 32% of the overall composition, highlighting the emphasis on renewable energy. This is followed by telecommunications infrastructure, mainly cell tower REITs, which contribute 19%. The multi-utilities and construction & engineering sectors also play crucial roles, with contributions of 11% and 10%, respectively. Notably, the oil and gas storage and transport sector, typically a significant component in traditional infrastructure indices, occupies minimal positions in this green-focused index.
The ETF comes with an expense ratio of 0.35%.