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Finnish pension firm makes significant investment in DWS US climate action ETF

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DWS in the US has announced the listing of Xtrackers MSCI USA Climate Action Equity ETF (NYSE: USCA), with significant first day investment from Ilmarinen. The firm writes that the fund is designed for investors seeking exposure to large and mid-cap companies in the United States that are leading their sector peers in taking actions relating to climate transition.

The investment of approximately USD2 billion on the first day of trading makes it the largest ETF launch of all time in the US and also the single largest climate investing ETF launch, underscoring, the firm writes, continued investor demand for sustainable investment solutions. The investment into USCA by Ilmarinen, Finland’s largest private earnings-related pension insurance company, is part of Ilmarinen’s investment strategy that is aligned with its goal to achieve a carbon neutral portfolio by the end of the year 2035.

The investment in USCA incorporates existing investments Ilmarinen has in an Xtrackers ETF fund that it helped start in 2019, and that has tripled in assets under management since its launch. With USCA, Ilmarinen and DWS seek to build upon their successful partnership.

DWS Americas CEO Dirk Goergen commented on the launch, saying: “DWS is pleased to partner with Ilmarinen to establish this new Xtrackers fund in the U.S. to help drive the transition to a low carbon economy. As we shared at our Capital Markets Day, we are focused on providing investors bespoke index investment solutions across asset classes and expanding the Xtrackers brand in the Americas with specialized products with attractive long term return opportunity.”

Ilmarinen’s Chief Investment Officer Mikko Mursula commented that “passive strategies form an important part of our overall investment strategy, and it is important to us to align these investments with our climate goals.”

The firm writes that the fund, using a “passive” or index investing investment approach, seeks investment results that correspond generally to the performance, before fees and expenses, of the MSCI USA Climate Action Index, which is comprised of large and mid-capitalisation companies in the United States that the index’s methodology assesses as leading their sector peers in taking action relating to a climate transition. Companies from the MSCI USA Index (the “Parent Index”) are assessed relative to their sector peers based on their emissions intensity, emissions reduction commitments, climate risk management and revenue from greener businesses. The Underlying Index uses this assessment to select 50 per cent of the companies from each Global Industry Classification Standard (GICS) sector of the Parent Index. Overall, the Underlying Index targets a coverage of 50 per cent of the companies from each GICS sector from the Parent Index.

“US investors considering how to lower their carbon emissions over the long term are looking for best-in-class, forward looking strategies that align with their objectives,“ says Arne Noack, Head of Systematic Investment Solutions, Americas. “The launch of USCA is an example of our ability to launch products that meet the needs of our clients in a timely manner, while further extending our line-up of ETFs to invest in today’s markets.”

Peter Lidblom, Head of Xtrackers Sales, Nordics says: “This is another milestone in Xtrackers Nordic ETF business where we again have showed our capabilities in launching state of the art and scalable investment solutions to sophisticated investors in our region.”

The Fund, with a net/gross expense ratio of 0.07 per cent, expands to 15 DWS’s suite of climate related and ESG focused ETFs, which as of March 23, 2023, consisted of 14 products with a total of approximately USD4.5 billion in assets under management. DWS’s climate related and ESG-focused ETFs represent approximately 24 per cent of Xtrackers overall AUM in the US of approximately USD19.1 billion as of March 23, 2023.

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