Sea levels are rising, glaciers are melting and extreme weather events such as tornadoes or floods are becoming more frequent and intense. Even if these climate events currently seem to be far from our doorstep, the effects of climate change, such as global warming, can already be observed worldwide. In the long term, it is the deterioration of air and water quality that threatens the health of us all, because climate change affects our daily lives: the food we eat, the water we drink and the air we breathe.
Climate investing refers to investing in companies or projects that have a lower climate footprint than their comparable peers - for example "green bonds" or investments in listed companies that have a good environmental record. They belong to the so-called ESG investments, but also focus on potential transition opportunities in addition to the ESG performance of a company. By placing capital in these kinds of opportunities, investors are reducing exposure to climate risks, while also investing in the innovative technologies shaping our future.Investments to address Climate Change
Sustainable Investments to address Climate Change
Investments in Climate Change ETFs support technologies or companies that are likely to become important as the world transitions away from fossil fuels and carbon-intensive industries. Thus, Climate Investing offers the opportunity to invest in companies seeking to improve their sustainability practices and reduce their carbon footprint.
Xtrackers Climate-focused ETFs
Climate investing relates to investing in companies or projects that have a lower climate footprint than comparable companies. Investments in Xtrackers Climate Change ETFs support technologies or companies that are likely to become more important as the world moves away from fossil fuels and carbon-intensive industries. Discover our climate change-focused ETFs.
| Climate Investing Solutions with Equity ETFs | Climate Investing Solutions in Green Bonds | |
| Xtrackers Climate Transition ETFs are suitable for investors looking to achieve a low tracking error relative to the standard benchmark[1] while contributing to sustainability improvement to achieve the global climate goal[2]. | Xtrackers Net Zero Pathway ETFs are based on EU Paris-aligned Benchmark (PAB) regulation to reduce greenhouse gas emissions. They give exposure to companies that are actively engaged in climate change to reduce carbon emissions[3]. | Xtrackers Green Bonds offers investment opportunities in projects that can contribute to the climate transition. As there are strict requirements on the use of proceeds of green bonds, investors have the possibility to directly help finance environmental projects[4]. |
| Climate change mitigation refers to efforts to reduce or prevent emission of greenhouse gases (GHG) or remove those gases from the atmosphere. Mitigation of future climate risks can mean using new technologies and renewable energies, making older equipment more energy efficient, or changing management practices. | Green bonds seek to finance green projects - this means that they support sustainable projects that have the potential to contribute to climate change even beyond the life of the project. | |
| Climate Transition ETFs | Net Zero ETFs | Green Bonds |
Xtrackers Climate-focused ETFs
| Climate Investing Solutions with Equity ETFs | Climate Investing Solutions in Green Bonds | |
| Xtrackers Climate Transition ETFs are suitable for investors looking to achieve a low tracking error relative to the standard benchmark[1] while contributing to sustainability improvement to achieve the global climate goal[2]. | Xtrackers Net Zero Pathway ETFs are based on the targets of the Paris Agreement Benchmark (PAB) to reduce greenhouse gas emissions. They give exposure to companies that are actively engaged in climate change to reduce carbon emissions[3]. | Xtrackers Green Bonds offers sustainable investment opportunities in projects that can contribute to the climate transition. The fixed income securities steering an issuer’s investment decisions - contributing to climate change. |
| Climate Transition ETFs | Net Zero ETFs | Green Bonds |
Why is Climate Investing Important?
The effects of climate change are becoming more and more apparent - global warming is increasing by the day. In summary, climate change is one of the biggest challenges of our times[5].
Why is Climate Investing Important?
The importance of climate investing has increased in recent years as the impacts of climate change become more apparent - this is also shown by actual figures and forecasts on global greenhouse gas emissions.
Working Together to Reduce Carbon Emissions
Companies, countries, organisations and institutions across society need to do the work of aligning their emissions with the global goal of a low-carbon future. Climate investing can help to shift the investor’s portfolio towards companies with a lower carbon footprint and those who are actively working towards the climate transition. There is a growing consensus among both governments and businesses on the fundamental role of carbon pricing[9] in the transition to a decarbonized economy.
| Benefits of Carbon Pricing | ||
For governments, carbon pricing is one of the most important instruments in the climate policy needed to reduce emissions. It is used to capture the external costs of greenhouse gas emissions and pass them on to polluters. |
Companies use internal carbon pricing to assess the impact of binding carbon prices on their operations and to identify potential climate risks. In addition, the use of renewable energies becomes more attractive for companies. |
 Long-term investors can use carbon pricing to analyse the potential impact of climate action on their portfolio, allowing them to adapt Climate Investing-strategies and shift capital toward low-carbon or climate-resilient activities. |
Regulations for Sustainability-driven Investments
Many countries have approved policies and regulations to encourage sustainable investment and to align them with international agreements. The following comparison shows the most important regulations for investments in climate-focused ETFs.
| Paris Agreement | EU Taxonomy | SFDR | TCFD |
|
The Paris Agreement aims to limit the global temperature increase under 2 degrees, in the best case to 1.5 degrees Celsius. It was signed in 2015 by 194 nations - including China, the United States. Read more |
The EU Taxonomy contains definitions for significantly contributing to six environmental objectives. Reporting on these will become mandatory for companies[10]. Read more |
The Sustainable Finance Disclosure Regulation (SFDR) sets transparency requirements for financial products and services that enhance environmental or social objectives. Read more |
The Task Force on Climate-related Financial Disclosures (TCFD) has developed consistent recommendations for companies to disclose climate-related risks and opportunities. Read more |
In addition to these regulations, there are a number of international initiatives to promote sustainable investments and reduce the impact of climate change at the investor level, e.g. the Principles for Responsible Investment (PRI)[11] and the Institutional Investors Group on Climate Change (IIGCC)[12].
Regulations for Sustainable Investments
Many countries have approved policies and regulations to encourage sustainable investment and to align them with international agreements. The following comparison shows the most important regulations for investments in Xtrackers climate-focused ETFs.
| Paris Agreement | EU Taxonomy | SFDR | TCFD |
|
The Paris Agreement aims to limit the global temperature increase under 2 degrees, in the best case to 1.5 degrees Celsius. It was signed in 2015 by 194 nations - including China, the United States. |
The EU Taxonomy contains definitions for sustainable activities. Since the beginning of 2023, the classification system has been implemented for all six targets of the EU Climate Regulation[10]. |
The Sustainable Finance Disclosure Regulation (SFDR) sets transparency requirements for financial products and services that enhance environmental or social objectives. |
The Task Force on Climate-related Financial Disclosures (TCFD) has developed consistent recommendations for companies to disclose climate-related risks and opportunities. |
In addition to these regulations, there are a number of international initiatives to promote sustainable investments and reduce the impact of climate change at the investor level, e.g. the Principles for Responsible Investment (PRI)[11] and the Institutional Investors Group on Climate Change (IIGCC)[12].
Xtrackers Climate Investing Product Range
Investments in Xtrackers climate-focused ETFs offers the opportunity to help to shift the investors’ portfolio towards companies that take ESG-requirements into account of their business strategy. Discover our broad range of Climate Change ETFs now.
Xtrackers Climate Investing Product Range
Investments in Xtrackers climate-focused ETFs offers the opportunity to support companies in reducing their carbon footprint and can help to shift the investors’ portfolio towards companies that take ESG-requirements into account of their business strategy. Discover our broad range of Climate Change ETFs now.
Climate Transition - Reducing Exposure to Carbon Emissions
The Climate Transition Benchmark supports the transition to a low-carbon economy without committing to temperature targets. The indices underlying our Xtrackers Climate Transition range exceed the minimum requirements of the EU Climate Transition Benchmark, combining it with sustainability improvements. Xtrackers Climate Transition ETFs utilise the MSCI Select Sustainability Screened CTB index family. They consider both the opportunities and risks associated with transition to a low carbon economy, enabling investors to integrate climate and sustainability considerations into their portfolio strategy.
Learn more about MSCI ESG Indices
Climate Transition - Reducing Exposure to Carbon Emissions
The Climate Transition Benchmark supports the transition to a low-carbon economy without committing to temperature targets. The indices exceed the minimum requirements of the EU Climate Transition Benchmark, combining it with sustainability improvements. Xtrackers Climate Transition ETFs utilise the MSCI Select Sustainability Screened CTB index family. They consider both the opportunities and risks associated with transition to a low carbon economy, enabling investors to integrate climate risk considerations into their portfolio strategy.
Net Zero Pathway ETFs - Investments in a low-carbon Future
Xtrackers Net Zero ETFs meet the requirements for the Paris Agreement Benchmark while tracking the Solactive ISS ESG Net Zero Pathway indices. The Paris aligned indices use company-based data to align the portfolio with companies that are actively addressing climate change.
Investors can play a critical role in the transition to net-zero by shifting capital to companies with achievable net-zero targets, by excluding those with poor records on emissions and by using engagement to influence companies’ long-term strategies.
Net Zero Pathway with a Nordic flavour
An Xtrackers Net Zero solution is also available for investors who wishe to invest in the Nordic equity market. The index of Xtrackers Nordic Net Zero Pathway Paris Aligned UCITS ETF has carefully been developed together with Nordic investors and Solactive to meet the requirements for a well-diversified Nordic equity portfolio, still maintaining similarities to traditional core Nordic benchmarks. The index methodology excludes micro caps and applies limits on single-stock-weights to reduce concentration. For example, 9% is the maximum weight an individual stock can have at the rebalancing of the index. Resulting in a portfolio of approximately 180 Nordic stocks.
Corporate and Government Green Bonds
With Xtrackers ETFs, fixed income investors have exposure to invest into environmentally sustainable initiatives using externally verified green bonds. By financing green capital expenditures, these bonds offer a powerful mechanism to direct forward-looking investment spending while providing critical transitional financing to sectors most in need. In terms of risk and return characteristics, Xtrackers Green Bonds do not differ significantly from traditional fixed income ETFs.
Corporate and Government Green Bonds
With Xtrackers ETFs, fixed income investors have exposure to invest into environmentally sustainable initiatives using externally verified green bonds. By financing green capital expenditures, these bonds offer a powerful mechanism to direct forward-looking investment spending while providing critical transitional financing to sectors most in need. Although green bonds do not differ significantly from traditional fixed income investments in terms of risk and return characteristics.
Climate Investing ETFs - FAQ
What are the incentives to invest in climate-related ETFs?
Investors who construct portfolios with climate change in mind could pursue one or more of the following achievements:
- …to align their investments with personal values around sustainability and climate change
- …to reduce climate risk and carbon emissions relative to a comparable benchmark portfolio
- …capitalise on opportunities from the climate transition
Investors who construct portfolios with climate change in mind could pursue one or more of the following achievements:
- …to align their financial and personal values
- …to reduce climate risk and carbon emissions
- …capitalise on opportunities from the climate transition
How to invest in Xtrackers Climate-focused ETFs
| Scopes for calculating the emission level | ||
| Scope 1 | Scope 2 | Scope 3 |
|
… direct emissions from sources owned or controlled by a company. |
… indirect emissions from purchased electricity, steam, heat, and cooling |
… all other emissions associated with a company's activities |
In addition to stock market ETFs, there is also the possibility to invest in climate-related fixed income solutions: Investors can choose between issuer-based analysis ETFs (similar to equity ETFs that comply with EU regulations) and green bonds.
Next to the company-focused regulatory benchmarks, investors may also elect green bonds for their portfolio. These bonds channel capital into various climate-related projects and are externally verified, providing another recognized standard investors can rely on in the climate investing space.
Summary of product features
Xtrackers Climate Investing solutions at a glance - Features and characteristics of our climate-focused ETFs:
| Equities | |||
| Xtrackers ETF (ISIN) | Climate Focus | Underlying Index Family | Benchmark |
| IE000P4AYI47 IE000N9MLVT1 IE000W6L2AI3 IE000GYDNJS5 IE0006FDYJF8 |
The regulation on Climate Transition provides a reliable framework for investors to align their portfolios with scientific evidence on climate change | MSCI Climate Transition Indizes | Climate Transition Benchmark (CTB) |
| IE000TZT8TI0 IE0001JH5CB4 IE000UZCJS58 IE000Y6L6LE6 IE00074JLU02 IE0002ZM3JI1 IE000HT7E0B1 |
Compared to Climate Transition Benchmarks, Paris-aligned Benchmarks feature a higher “one-off” decarbonization of the investment (50% vs. 30%) | Solactive ISS ESG Indizes | Paris Aligned Benchmark (PAB) |
| Fixed Income | |||
| Xtrackers ETF (ISIN) | Climate Focus | Underlying Index | Bond Index Type |
| IE0003W9O921 IE000MCVFK47 |
Green Bonds capacity to deliver environmental benefits sets them apart as a powerful tool for conscious capital allocation. Xtrackers Corporate and Government Bonds offered are Paris Aligned ETFs, of which reporting is carried out in accordance with Art. 9 as per SFDR. | Bloomberg MSCI Global Corporate Index | Corporate Bonds |
| LU2504532487 | iBoxx Eurozone Sovereigns Green Bonds Capped Index | Government Bonds | |
Risks of Investments in Xtrackers Climate Change ETFs
Investments in ETFs involve numerous risks, including market fluctuations, exchange rate risk, liquidity risk, interest rate risks, counterparty risk, regulatory change, possible delays in repayment and loss of income and principal invested. Furthermore, significant fluctuations in the value of the investment are possible, even over short periods of time.
For general risk information please click on the Risks and Terms tab.
Risks of Investments in Xtrackers Climate Change ETFs
Xtrackers ETFs involve numerous risks, including but not limited to general market risks, credit risks, interest rate risks and liquidity risks. As a result, the value of an investment in an Xtrackers ETF may result in losses, up to and including a total loss of the amount originally invested. In addition, changes in currency exchange rates may affect the value of your investment. If the currency of your country of residence is different from the currency in which the underlying investments of the funds are made, the value of your investment may increase or decrease due to fluctuations in currency exchange rates.
1. The underlying indices are based on the Climate Transition Benchmark (CTB). The regulation provides a reliable framework for investors to align their portfolio with scientific evidence on climate change.
2. In addition to the minimum standards of the Climate Transition Benchmark requirements, the indices take sustainable risks into account, specifically consider 8 out of 14 Principal Adverse Impacts (PAI) - a set of standardised metrics for measuring sustainability risk.
3. Xtrackers Net Zero Pathway ETFs fall under the category of Xtrackers ESG ETFs which disclose in accordance with Art. 8 of EU Sustainable Finance Disclosure Regime (SFDR).
4. Xtrackers Corporate and Government Green Bonds are externally verified and fall under the category of Xtrackers ESG ETFs which disclose in accordance with Art. 9 of SFDR.
5. Source: UN Emissions Gap Report (EGR) 2022, as of October 2022
6. Source: https://www.forbes.com/sites/zacharysmith/2022/01/06/by-2030-earth-could-experience-once-per-century-heat-waves-every-other-year-study-says/?sh=48f5f5724681 as of January 2022
7. Source: https://press.un.org/en/2023/sc15199.doc.htm as of February 2023
8. Source: https://de.statista.com/statistik/daten/studie/609823/umfrage/hoechste-gemessene-temperaturen-weltweit-nach-regionen/ survey period: 1905 to 2021
9. By pricing the external costs of producing carbon emissions and passing them to the polluting companies, carbon pricing is considered one of the most effective methods to encourage corporations to lower emissions and more sustainable production.
10. The six environmental objectives of the EU taxonomy are: 1. climate change mitigation, 2. adaptation to climate change, 3. sustainable use of water resources, 4. shift to a circular economy, 5. pollution prevention, 6. protection of ecosystems and biodiversity. (Source: EU Taxonomy Timeline)
11. The United Nations Principles for Responsible Investment (PRI) is an organisation dedicated to promoting ESG-factors among the world’s investors.
12. The Institutional Investors Group on Climate Change (IIGCC) is the European membership organisation for investor collaboration on climate change taking action for a prosperous, low carbon future.
13. The EU Low Carbon Benchmarks Regulation (EU BMR), defines high climate impact sectors as those that are key to the low-carbon transition, including electricity production, transportation, industry, agriculture, and forestry.