Smart Beta Channel

A New Spin on ESG (Economic, Social and Governance) ETFs

Exchange traded funds and other strategies that incorporate Economic, Social and Governance, or ESG, are increasingly popular with investors and issuers are obliging with an array of new ETFs adhering to ESG investing principles.

Last week, SerenityShares, a unit of SerenityShares Investments, a Washington-DC based registered investment advisor, introduced the SerenityShares IMPACT ETF (NYSEArca: ICAN). The new ETF “aims to identify firms whose activities benefit society and the planet while excluding investments in traditional areas of ESG concern such as tobacco, offensive weapons, and fossil fuel (oil, gas, and coal) exploration,” according to a statement from SerenityShares.

ICAN starts with “a list of all 6500+ companies listed on the NYSE and NASDAQ, screens are applied to (a) eliminate companies involved with tobacco; weapons; oil, gas, and coal exploration; and (b) select companies that meet our market cap (>$1.5B), price (>$5/sh), and liquidity screens. We then review all remaining companies to identify firms whose activities have a direct, beneficial impact that addresses a societal, social, or environmental challenge,” according to the issuer.

The new ETF holds 115 stocks and its roster includes familiar names such as Walt Disney (NYSE: DIS), Apple Inc. (NASDAQ: AAPL) and Facebook (NASDAQ: FB).

ICAN targets themes such as education infrastructure, loans to small enterprises, farming, pollution control, renewable energy, access to healthcare, energy efficiency and clean water. Nine of the 11 GICS sectors are represented in ICAN with weights ranging from 1% to 19%. Industrials are the new ETF’s largest sector allocation. Apple is ICAN’s largest holding at 3.7%.

“The key to the SerenityShares Impact ETF is the innovative methodology it developed. Based on 20 core themes identified and defined by the firm, it focuses on activities that seek to benefit society or our planet—environmental stewardship, access to local healthcare, renewable energy, clean water, eldercare, education, community building, and access to libraries of information. The use of an ETF structure enables SerenityShares to offer Impact Investing in a liquid, transparent, tax efficient and easily accessible manner,” said SerenityShares.

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