The pitch of this new sustainable ETF? Give back the profits.

Do you feel that society and the environment are starting to break down? There’s an ETF for that.

Newday Impact ETF Sustainable Development Goals (SDGs) offers a growth-focused product that promotes double impact, promising to advocate for environmental and social improvements and donating 10% of its revenue to global youth education and skills development programs.

American dystopia

Partnered with a veritable who’s who of progressive economists, scientists and nonprofits, the firm’s investment criteria are based on sophisticated analysis of global ills and solutions. This approach may put off investors who disdain concepts such as decarbonizing the economy, but should resonate with anyone who thinks Mad Max can drive down Mainstreet, USA, from day to day. other.

Although the issues are global, the United States is an ideal place to focus on these daunting issues, according to Newday President Anne Popkin. “It doesn’t matter which side of the political spectrum you’re on,” Popkin said. The United States has “food inflation, heat waves, rising tides in the south, and fires in California. Everything happens here. »

Limits to growth

ETF’s reasoning is based on the belief that the planet’s ability to withstand human impact on the environment is limited. When these limits are exceeded, we are said to have exceeded the “planetary boundaries” of the earth. In fact, several resources, such as forest land – essential for food, fuel, clean water and air – have already been stretched beyond a limit of safe use. Crossing such a boundary means that humans will find it increasingly difficult to thrive and, eventually, survive on the planet.

Newday indicates two approaches that may alleviate this problem. First, the eponymous Sustainable Development Goals encompass 17 broad areas for improving human and environmental outcomes. Established in 2015, the United Nations’ Sustainable Development Goals help measure progress against global goals, like ensuring safe drinking water around the world by 2030. If that sounds like a stretch, consider the latest version of this exercise , called the Millennium Development Goals, helped lift more than a billion people out of poverty between 2000 and 2015.

Second, Newday took the approach of Earth4All, a group of economists and scientists advocating for an overhaul of the economic system to stay within planetary boundaries. Drawing on computer modelling, they argue that climate change and inequality are inextricably linked.

Earth4All calls for an economic system less focused on growth metrics and more on the resilience and well-being of society and the environment. Some of these ideas come from the 1972 book, Limits to growthwhich was also based on computer models that predicted a dystopian future if the trends of the time continued.

Youth as a solution

“Our generation will basically try to save the ship from sinking,” Popkin said, “but the young will be the ones to find a way forward.” Based on this adage, SDGS is partnering with UNICEF to develop its advocacy strategy.

Typically, companies like Newday engage companies from meeting with executives, voting shareholder proxies, to filing shareholder proposals requesting specific changes to company policies.

The ETF will also donate 10% of its revenue to several non-profit organizations that support youth leadership. One such group is EarthEcho International, which is building a youth movement to protect and restore the oceans. EarthEcho was co-founded by ocean ecologist Philippe Cousteau, Jr., grandson of famed ocean explorer Jacques Cousteau.

Popkin also points to the declining middle class and growing inequality in the United States as issues the ETF hopes to address.

Under the hood of the ETF

SDGs seeks long-term capital appreciation, a category that still makes sense given current market volatility for investors with a longer time horizon. Referenced on the S&P 500, assets under management SDGs has an expense ratio of 0.75%, which is about average for this type of ETF.

The ETF invests in a mix of value and growth stocks, with around 60% in US-based companies and around 40% overseas. Managers also avoid investments in specific countries, including Russia and China.

All holdings are selected to meet basic ESG criteria. Newday assesses the quality and extent of the company’s sustainability information and whether third parties have certified the data. SDGs also avoids investing in companies engaged in the production of landmines, tobacco and other controversial products. The fund also avoids companies involved in the fossil fuel industry or dependent on child labor.

Newday’s SDGs is not the only ETF that links its holdings to the United Nations Sustainable Development Goals. For example, the MSCI Global Impact ETF (SDGs) tracks the MSCI index of companies meeting at least one of 17 goals. Morningstar gives this ETF a five-star silver rating for its good valuation and good management team. The expense ratio is typical for an index ETF at 0.49%, and with over $384 million in assets under management, it has proven popular.

There are also many ETFs that only target one of the 17 goals, such as reducing emissions that cause climate change. The ETF SPDR MSCI USA Climate Paris Aligned (NZUS) is an example.

These ETFs, issued by more conventional managers, lack Newday’s strong commitment to corporate engagement and profit sharing with major nonprofit groups. Although Newday is a small fry compared to companies like BlackRock or State Street, the company seems determined to focus on engagement. Unlike some of its impact-focused competitors, like Calvert and Green Century, the company does not yet have a significant track record as an investor or activist.

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