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MSCI index changes force DWS to pull ESG ETF

index, changes, ESGDWS is to close its €70 million European energy ETF after data provider MSCI altered the sustainability metrics of the underlying index.

The change to the index means the Xtrackers MSCI Europe Energy ESG Screen Ucits ETF (XSER) will shutter on March 14.

DWS stated the MSCI Europe Energy ESG Screened 20-35 Select is no longer suitable as a reliable benchmark, leaving the fund with an “extremely small number of constituents”.

The fund had returned a one-year trailing return of 32.67%, and its top holdings include Shell, TotalEnergies, BP and Equinor.

DWS had sought to find a suitable index for the ETF to switch to but said no such product exists.

In a statement, the German asset manager said: “While the board of directors is supportive of changes which enhance the sustainability features of ESG indices in general, in this situation, the implementation at the level of the reference index would result in the majority of current constituents, which are closely associated with the European energy market, being removed, thereby leaving the reference index with an extremely small number of constituents.”

MSCI said it sought to bolster its ESG credentials, partly driven by European regulatory developments.

Earlier in February, MSCI opted to increase the ESG credentials of some indices – a move that impacted BlackRock’s $15 billion ESG screen ETF range.

The move comes after Invesco was forced to adjust its ESG ETF line-up after index provider Solactive shifted its methodology in order to comply with new Sustainable Finance Disclosure Regulation, while in November, BlackRock downgraded its entire Article 9 ETF line-up to Article 8.

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