DWS to switch four synthetic emerging market ESG ETFs to physical replication

One of the ETFs may also start lending out its underlying securities

DWS is set to convert four emerging market ESG ETFs from synthetic to physical replication.

More than a decade since launch, the firm’s Asia, Latin America, EMEA and Asia ex-Japan ETFs will switch to full replication, meaning the ETFs will own the underlying equities rather than swap contracts in “all or a substantial number” of the stocks in their respective indices.

The ETFs will also undergo name changes:

The changes will be made between 13 February and 12 August with more information to follow on or near the implementation date.

DWS said its Asia ESG ETF “may” start engaging in securities lending once the changes have been made, allowing it to generate lending revenue that effectively lowers investors’ cost of ownership.

The German asset manager added any collateral received as part of lending transactions will be ESG-compliant, however, its Latin America, EMEA and Asia ex-Japan strategies will not engage in securities lending.

The decision by DWS follows a similar move by BlackRock in March last year when the firm switched the methodology on its iShares MSCI EM Consumer Growth UCITS ETF (CEMG) from sampling to full replication.

Last month, DWS also expanded its emerging market ESG offering with the launch of the Xtrackers Emerging Market Net Zero Pathway Paris Aligned UCITS ETF (XEMN).

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