Socially responsible investments, such as environmental, social and governance (ESG) exchange-traded funds (ETFs) are not relatively new, but the concept is still struggling to break into the realm of the mainstream, particularly in the current risk-on investing landscape where major indexes like the S&P 500 are hitting record highs. One firm, Beyond Advisors, is looking to differentiate itself among ESG investing through specificity as it filed with the Securities Exchange Commission (SEC) to bring the U.S. Climate Vegan ETF to the industry.
The index tied to the fund, the U.S. Vegan Climate Index, sifts through companies within the Solactive U.S. Large Cap Index and screens for those that conduct business activities that aren’t detrimental to the well-being of animals. Based on a press release, investors of the fund will essentially ” avoid funding the slaughter of 13 animals a year for every $1,000 invested.”
With $6 billion worth of capital in ESG funds, it still represents a pittance with respect to a $3.5 trillion ETF industry. By focusing on the specifics of vegan investing, the U.S. Climate Vegan ETF hopes to capture more market share by honing in on investors who are privy to these social issues.
“Clearly the ESG label isn’t doing the trick,” said Bloomberg Intelligence analyst Eric Balchunas. “So it is no surprise that issuers are trying a different tact in being more clear and specific in the names of the products in an effort to excite certain types of investors.”
The price of entry for the fund will cost investors a management fee equal to 60 basis points or $6 for every $1,000 invested. However, investors who care enough about this niche aspect of ESG investing will probably overlook the fee.
“For the first time that proportion of the US stock market whose business models harm animals and the environment can be identified,” says Beyond Advisors investment analyst Claire Smith. “With reports suggesting 6% of the US population identify as vegan, Beyond Advisors anticipates demand for financial products based on this index to serve the requirements of vegans and environmentalists who do not want their money supporting businesses whose activities they oppose.”
ESG Fixed-Income Investing
The focus on environmental, social and governance (ESG) investing has made headway in the form of equities, but investors are also looking at opportunities within the fixed-income space where funds can make innovations to meet this demand. Investment firms like Pimco and Fidelity Investments are in the forefront of building their sustainable fixed-income funds through the selection of debt issues of companies with excellent ESG ratings.