Deutsche Bank lists ethical ETF in UK

Deutsche Bank has launched its Global Fund Supporters ETF on the London Stock Exchange, investing in companies involved in the prevention and treatment of disease.

The ETF, first unveiled on the Deutsche Boerse in December last year, tracks a Dow Jones index compiled of the 50 largest companies that support the mission of the Global Fund.

The Global Fund is dedicated to the prevention and treatment of HIV/Aids, tuberculosis and malaria. Since its establishment in 2002, the funding agency has committed over $21bn across 144 countries towards disease prevention, treatment and care programmes.

The ETF is also physically replicated, making it an anomaly in db x-trackers swap-based platform of ETFs. Using a direct investment approach ensures that investors will not be limited by restrictions on derivatives investing and makes the Global Fund Supporters ETF universally accessible.

Having pioneered debt-swaps in a number of developing countries, the db x-trackers ETF is the latest in a series of financial initiatives from the Global Fund. Executive director Michel Kazatchkine says the organisation's presence at the London Stock Exchange is a natural extension of its structure as a public/private partnership.

The Global Fund even has its own head of innovative financing, Robert Fillip, who explains that projects such as Product Red have helped the organisation develop good links with a number of companies in the financial sector.

He adds: "We thought, why not create a product leveraging those relationships?"

A company becomes eligible for inclusion into the ETF's underlying Dow Jones Global Fund 50 index to Fight AIDS, Tuberculosis and Malaria if it gives to the Global Fund or one of its initiatives, or alternatively if it is seen to be contributing in its own way to the fight against these diseases.

All constituents are drawn from the universe of the Dow Jones Global index, and Fillip says it is important that while the strategy appears esoteric, the vehicle and index are mainstream.

"People worry that a 'do good' investment means it is not going to perform, or it is going to cost a premium, but what we have here is a diversified index that supplies market performance at low cost."

Fillip says the Global Fund Supporters ETF marks a potentially fertile avenue in innovative financing, which has previously been reliant on different taxation models. The win-win structure appears particularly important as governments in developed markets struggle with debt. 

Kazatchkine adds: "We have to ask how the huge amounts of money in finance can be leveraged towards healthcare.  The questions are especially pertinent as we come out of the credit crisis."

As well as directing finance towards supportive companies, the Global Fund Supporters ETF benefits the Global Fund directly, with db x-trackers giving up all management fees after expenses to the agency.

Since its initial launch in Germany three months ago, the ETF has gathered around $5m in assets under management (AUM). With the total expense ratio set at 0.25%, the Global Fund is expecting to receive somewhere between 10 or 20 basis points in revenue.

Fillip says: "We're not expecting this product to fill the billion dollars funding gap, but then a mosquito net only costs around $5."

He explains that the ETF wrapper provides a cheap and straightforward vehicle to gauge demand for this type of innovative financing. "You have to start with the simple things - to prove it can be done and that there is interest in it."