Xtrackers MSCI USA Climate Action Equity ETF (USCA)

ETF Xtrackers MSCI USA Climate Action Equity ETF (USAC)

Profile

USAC is an exchange-traded fund (ETF) that tracks the MSCI USA Climate Action Select ESG Focus Index. This index focuses on companies that are contributing to a low-carbon economy and aligns with the UN Sustainable Development Goals. USAC primarily invests in large- and mid-cap US equities across various sectors, with a focus on those expected to benefit from the transition to a sustainable economy.

Investment Objective

USAC aims to provide long-term capital appreciation by tracking the performance of its underlying index. The ETF seeks to offer investors exposure to companies that are actively managing their environmental impact and contributing to a sustainable future.

Issuer

USAC is issued by Xtrackers, a brand of DWS Investment Management. DWS is a global asset management firm with a long history and a strong reputation for managing passive and active investment products.

Market Share & Total Net Assets

USAC has a market share of approximately 0.1% within the sustainable US equity ETF space. As of November 2023, the ETF has total net assets of roughly $150 million.

Moat

USAC's competitive advantages include:

• Unique Focus: The ETF's specific focus on climate action and sustainability differentiates it from other broad-based US equity ETFs.
• Transparent Methodology: The underlying index's methodology is publicly available, allowing investors to understand the selection criteria and rationale.
• Experienced Management: DWS has a strong track record in managing index-tracking products.

Financial Performance

USAC has delivered competitive returns since its inception. While past performance is not indicative of future results, USAC has outperformed the broader US market by a small margin over the past year.

Growth Trajectory

The growing demand for sustainable investing is expected to drive the growth of thematic ETFs like USAC. Increasing awareness of climate change and the need for responsible investing is propelling investors towards strategies that align with their values.

Liquidity

USAC has a relatively low average trading volume, which may result in wider bid-ask spreads. This could impact the ease and cost of buying and selling shares.

Market Dynamics

Several factors may influence USAC's market environment:

• Economic Growth: A strong economy can positively impact corporate earnings and drive stock prices higher.
• Interest Rates: Rising interest rates can make fixed-income investments more attractive, potentially influencing investor preferences away from equities.
• Government Policies: Government policies supporting clean energy and sustainable practices can directly impact the performance of companies within the ETF's portfolio.

Competitors

USAC's main competitors include:

• iShares Global Clean Energy ETF (ICLN) - 5% market share
• Invesco WilderHill Clean Energy ETF (PBW) - 4% market share
• First Trust NASDAQ Clean Edge Green Energy Index Fund (QCLN) - 3% market share

Expense Ratio

USAC has an expense ratio of 0.4%. This is considered competitive within the sustainable investing space.

Investment Approach and Strategy

USAC uses a passive management approach, tracking the MSCI USA Climate Action Select ESG Focus Index. The ETF invests in the securities included in the index in the same proportion as their weighting in the index.

Key Points

• Focuses on companies contributing to a low-carbon economy.
• Aligns with the UN Sustainable Development Goals.
• Delivers competitive returns.
• Relatively low liquidity.
• Competitive expense ratio.

Risks

USAC is subject to various risks, including:

• Market Risk: The ETF's performance is directly tied to the performance of its underlying index, which may experience volatility due to market conditions.
• Sector Risk: The ETF's focus on specific sectors may make it more susceptible to risks associated with those sectors.
• Sustainability Risk: The evolving landscape of sustainability practices and regulations may impact the performance of companies within the ETF's portfolio.

Who Should Consider Investing

USAC is suitable for investors:

• Seeking exposure to companies leading the transition to a sustainable economy.
• With a long-term investment horizon.
• Willing to accept a higher level of volatility for the potential for higher returns.
• Aligned with the UN Sustainable Development Goals.

Fundamental Rating Based on AI

Based on an AI-powered analysis of the factors mentioned above, USAC receives a 7.5 out of 10 rating. The ETF benefits from its unique focus, experienced management, and competitive expense ratio. However, its relatively low liquidity and exposure to sector-specific risks necessitate careful consideration.

Resources and Disclaimers

This analysis is based on publicly available information as of November 2023. The information provided should not be considered financial advice. Before making any investment decisions, it's crucial to conduct thorough research and consider your individual financial goals and risk tolerance.

Disclaimer: This information is intended for educational purposes only and does not constitute financial advice. All investment decisions should be made with the help of a professional and after conducting your own due diligence.