Xtrackers MSCI Emerging Markets Climate Selection ETF (EMCS) seeks to track the MSCI Emerging Markets Climate Selection Index, which measures the performance of emerging market companies selected based on their climate transition readiness and carbon footprint reduction potential. This geographic equity ETF provides exposure to developing market stocks while emphasizing environmental sustainability factors.
How It Works
EMCS uses a passively managed, market-capitalization-weighted approach that follows its climate-focused benchmark index. The fund selects emerging market companies based on MSCI's climate scoring methodology, which evaluates firms' carbon intensity, green revenue exposure, and climate transition preparedness. Holdings are rebalanced quarterly to maintain index alignment. The strategy combines traditional emerging markets exposure with environmental, social, and governance (ESG) screening to create a climate-conscious portfolio.
Key Features
- Combines emerging markets growth potential with climate-focused screening, targeting companies leading environmental transitions in developing economies
- Covers major emerging markets including China, India, Taiwan, and Brazil while excluding high-carbon-intensity sectors like coal
- Launched in 2018 with 0.72% dividend yield, offering income potential alongside capital appreciation from developing market exposure
Risks
- This ETF can lose value during emerging markets volatility, potentially declining 40-50% during global financial crises due to capital flight from developing economies
- Climate screening may exclude profitable sectors like energy and materials, potentially underperforming broad emerging markets during commodity booms
- Currency fluctuations can significantly impact returns as emerging market currencies often depreciate against the dollar during global uncertainty
Who Should Own This
Best suited as a satellite holding (5-15% of equity allocation) for ESG-conscious investors with 7+ year time horizons seeking emerging markets exposure with climate considerations. High risk tolerance required due to developing market volatility. Appropriate for investors wanting to participate in emerging markets growth while maintaining environmental investment principles.