Developing an ESG enhanced version of DAX for BlackRock

Asset owners

ETF providers

---

The need

BlackRock was looking to offer ETF clients interested in investing in German equities a sustainable alternative to its standard ETF which was based on the iconic German DAX^® index.

The challenge

BlackRock wanted to provide its clients with an ETF that reflected the risk/return characteristics of the original German DAX index while also taking into account carbon reduction and ESG requirements.

The solution

Using the power of the Axioma Portfolio Optimizer^TM and our leading index construction capabilities, we collaborated with BlackRock to develop the DAX ESG Target index. The index provides a portfolio optimization (re-weighting) to meet tracking error constraints (< 1.5% versus the parent DAX index) and carbon reduction goals. Additionally, the index creation incorporates ESG rating information from Sustainalytics, a leading global provider of ESG research, ratings and data. The index also applies Global Standards Screening provided by Sustainalytics as well as product involvement screens for weapons, tobacco, thermal coal, nuclear power, and oil sands.