Xtrackers MSCI USA Climate Action Equity ETF

As the global focus intensifies on mitigating climate change, investors are increasingly seeking opportunities to align their portfolios with sustainable goals. The Xtrackers MSCI USA Climate Action Equity ETF (USCA) offers a compelling investment solution for those looking to capitalize on the transition to a low-carbon economy while potentially generating strong returns. 

Danielle Yoo, Senior Product Specialist at Xtrackers at DWS provides valuable insights into the ETF and its potential benefits for investors. 

USCA: A Focused Approach to Climate Investing

Yoo explains that USCA is specifically designed to invest in U.S. companies at the forefront of combating climate change. "USCA specifically targets companies that are making significant strides in combating climate change," she states. This focused approach distinguishes USCA from broader ESG funds, offering investors a more direct exposure to the climate action theme. 

The ETF tracks the MSCI USA Climate Action Index, which employs a rigorous selection process to identify companies demonstrating strong climate-related performance. The index begins by excluding companies involved in severe ESG controversies and those with high carbon emissions. It then assigns a "Climate Transition Score" to each remaining company, evaluating factors such as emissions intensity, reduction commitments, climate risk management, and revenue from green businesses. 

"Using the assessments... the MSCI USA Climate Action Index selects 50% of the companies from each GICS sector of the MSCI USA universe resulting in about 300 stocks that possess the highest climate transition scores," Yoo explains. 

Strategy and Benefits of Investing in Climate Action

Yoo highlights the strategic advantages of investing in USCA. The ETF's sector neutrality ensures exposure to a diverse range of climate-focused companies across various industries. Additionally, the fund's alignment with the broader MSCI USA index offers diversification benefits.  

"We believe that all sectors should be represented in the economy, and also that there has to be transition in all sectors," Yoo emphasizes. 

Investors can potentially benefit from USCA in several ways: 

• Long-term growth: The ETF's focus on climate leaders positions it to capitalize on the long-term growth opportunities presented by the transition to a low-carbon economy. 
• Risk management: By investing in companies prioritizing climate action, investors may mitigate risks associated with climate-related regulations, reputational damage, and physical risks. 
• Alignment with values: For investors seeking to make a positive impact, USCA offers a way to invest in companies driving sustainable change. 

What Sets USCA Apart from Other ESG Funds

Yoo differentiates USCA from other climate and ESG-focused investment options by emphasizing the ETF's focus on engagement rather than exclusions. "The MSCI Climate Action Index embraces the idea of engagement while most others rely on exclusions in order to meet their climate objectives," she explains.

By investing in companies that actively contribute to climate solutions, USCA aims to drive positive change while other climate-related indices may focus solely on minimizing exposure to carbon-intensive industries, thus potentially creating significant sector tilts that could result in additional portfolio volatility. 

Sustainable Investing for the Future

The Xtrackers MSCI USA Climate Action Equity ETF (USCA) presents an opportunity for investors to participate in the global shift towards a sustainable future. By investing in companies at the forefront of climate action, USCA offers the potential for both financial returns and a positive environmental impact.  

As the world continues to grapple with the challenges of climate change, investment strategies like USCA are increasingly important in driving the transition to a low-carbon economy.