Socially responsible ETFs are more than a fell good investment. Strategies that track companies with the best interest of Americans at heart have also turned around a better return.
“America’s Most JUST Companies consistently outperform their peers in wages, job creation, work-life balance, environmental impact, and return on equity,” Martin Whittaker, CEO of JUST Capital, said in a note. “Aligning corporate behavior with the priorities of the American people is good for workers and good for business.”
According to a recent survey conducted by JUST Capital and Forbes, when compared to the Russell 1000 peers, America’s Most JUST Companies, which includes the JUST 100 list of top companies, have on average pay their median workers 26% more, pay a living wage to 12% more of their workers, are 9 times more likely to have conducted gender pay equity analyses, are 4 times more likely to have PTO and parental leave policy disclosures, are nearly 2 times more likely to offer flexible work hours or day care, are nearly 4 times more likely to have diversity targets, recycle 8 times more waste, give 6 times as much to charitable causes per dollar of revenue and employ 2.4 times as many U.S. workers.
More importantly to investors, these companies that look out for their American workers are also more likely to see improved business activity. For example, these JUST companies pay 99% fewer sales terms fines, 90% fewer environmental fines, 71% fewer worker safety fines and 41% fewer EEOC fines per dollar of revenue. Furthermore, JUST companies Have a 5% higher return-on-equity at 23% versus the 18% found for the average Russell 1000 company.
“Trust in our institutions is more important than ever right now. The JUST 100 recognizes companies that are doing right within society,” Forbes Chief Content Officer Randall Lane said in a note. “The Rankings help companies gauge their progress on benchmarks that go far beyond quarterly earnings toward long-term value creation for all stakeholders.”
JUST Capital, a nonprofit founded by Paul Tudor Jones that measures and ranks companies on the leading priorities of the American public, has put together the JUST U.S. Large Cap Diversified Index , which acts as the underlying benchmark for the Goldman Sachs JUST U.S. Large Cap Equity ETF (NYSEArca: JUST). JUST is based on the Russell 1000 benchmark and targets companies that score well on environmental, social and governance metrics.
To screen for its ESG-focused components, Just Capital conducts an annual survey taken from the American public and analyzes 120,000 data points across 85 unique metrics to score companies based on how they perform on key issues prioritized by the public. For instance, companies are ranked from worker issues, like providing a living wage and workplace safety; to customer concerns, such as privacy protection and truthful advertising; to environmental impacts, including minimizing pollution and resource efficiency. Companies are ranked by overall score, and the top 50% are selected and weighted by market cap.
The indexing methodology hopes to capitalize on the fact that companies found in the socially responsible index historically pay better, create more jobs, pay fewer fines, give twice as much to charity, emit less greenhouse gas, and have higher return on equity, compared with the rest of the Russell 1000.
For more information on ESG-related investments, visit our socially responsible ETFs category.