Specifically, the indexing methodology tries to measure commitment to the UN’s Sustainable Development Goals, adherence to the principles of the UN Global Compact, commitment to reducing poverty and supporting economic development globally and exposure to countries with low levels of socioeconomic development for each company.
The index also implements an Overall ESG Score comprised of a company’s numerical scores for environmental, social and governance criteria. The methodology would exclude those companies that have products involved in adult entertainment, alcoholic beverages, controversial weapons, gambling, military contracting weapons, nuclear energy and small arms, or tobacco; have a detrimental controversy score for incidents related to company involving business ethics, governance, public policy, employee relations, social supply chain, society and community, operations, or environmental supply chain; are not compliant with the principles of the UN Global Compact; and have a below average Overall ESG Score relative to its global industry peers.
Additionally, the underlying index’s composition is based on 32 separate social indicators that address issues that has historically been important to the UNCDF. The five major groups include business ethics; employment practices; contractor and supply chain monitoring; community investment and social development programs; and financial inclusion in access to products and services.
“Ever since the United Nations defined its SDGs in 2015, investors have become increasingly interested in strategies that contribute to the realization of these ambitious goals. We’re proud to partner with the UNCDF, an organization that has been advocating for people in the least developed countries for over fifty years. Our ETF will allow investors to align their capital with UNCDF’s efforts to help these countries, including by making loans to small businesses, helping poor individuals access banking services, giving young people job training and loans, and expanding access to clean and affordable energy,” Ethan Powell, CEO of Impact Shares, said in a note.
For more information on new fund products, visit our new ETFs category.