Russia’s invasion of Ukraine is prompting an array of American and European companies to cease doing business in Russia.
In some ways, that can be considered a transparent model and one that takes into account stakeholder capitalism – a broader form of traditional capitalism. There are some exchange traded funds with which to access the emergence of stakeholder capitalism, including the ARK Transparency ETF (CTRU).
With its focus on transparent companies, CTRU provides investors with not only a unique approach to equities, but one that refreshes the environmental, social, and governance (ESG) style while putting stakeholder capitalism front and center.
“The idea that ESG concerns are financially material and therefore can impact a company’s bottom line is an essential element of sustainable investing and a key reason for its rapid growth. The funds we call ‘ESG funds’ tend to be those in which ESG analysis plays a central role. Most asset managers today have incorporated ESG analysis to some degree into their investment process,” notes Morningstar analyst Jon Hale.
A case can be made that amid Russia instigating war with Ukraine, some western companies are displaying transparency to not only investors, but other investors, by acknowledging Russia’s invasion of the sovereign country doesn’t mesh with their corporate values.
“As of this writing, at least 340 international companies have announced their withdrawal from Russia. It’s not all because of ESG, because other stakeholders–in particular, customers, employees, and business partners–are clamoring for companies to leave Russia,” adds Hale.
CTRU tracks the Transparency Index. An interesting element in the transparency equation is that while CTRU isn’t a dedicated ESG ETF in the traditional sense, several of its components are directly involved in solving environmental problems. Those holdings include Canadian Solar (NASDAQ:CSIQ) and Tesla (NASDAQ:TSLA).
“The urgent necessity of a just transition to a low-carbon economy to stave off the worst effects of climate change is, of course, a key driver of sustainability-themed investing. Funds that focus on climate action or other sustainability themes differ from those that take a more general ESG approach,” notes Hale.
Transparent companies are significantly less likely to become embroiled in environmental controversies than their less transparent counterparts. Additionally, highly transparent companies may be more likely to prioritize ESG issues, presenting investors with opportunities to make their voices heard on this front.
“Shareholder support for ESG-related proposals has skyrocketed in recent years. Not so long ago, just 10% support for a shareholder proposal was considered a “win” because it allowed the proposal to be resubmitted the next year, sometimes prompting management to take steps to address the issue. Today, it’s not uncommon for these proposals to garner a majority of shares voted,” concludes Hale.
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