Beyond Investing, a European finance consultancy, is listing a hardcore ESG ETF that aims to “address the concerns of vegans, animal lovers, and environmentalists”.
The US Vegan Climate ETF (VEGN) addresses these concerns by investing in a portfolio of companies that refrain from “directly contribut[ing] to animal suffering, destruction of the natural environment, and climate change”.
VEGN starts with the Solactive US 500 Large Cap Index. It then eliminates companies that make more than 2% of their revenue from environmental harm, animal abuse, etc. The companies that survive the cull – only 277, the prospectus indicates – are market weighted subject to a 5% cap for the biggest companies.
Interestingly and lastly, VEGN then ensures that its sector exposures are in line with the broad market benchmark. One wonders how this will be done for the energy sector, where most of the eliminations are presumably made.
Analysis – our children’s futures and activist ETFs
I have a complete sympathy with the political motives behind environmental ETFs. The last time carbon dioxide concentrations were 410 parts per million (i.e. where they are now) sea levels were 20 metres higher. The oceans are in a death spiral due to anthropogenic acidification. Animal species are going extinct at a rate not seen since the dinosaurs.
As all this happens, America’s political class takes bribes from the fossil fuel lobby (“campaign contributions”, “political donations” – if you prefer the euphemisms). To the extent they cover global warming at all, US mainstream media outlets pretend there’s some kind of scientific debate on the subject.
However if pro-environment ETFs are to avoid closing, they need to gather assets. (Beyond Investing cannot burn cash forever). Here, the track record of hardcore “impact” ETFs has not been good. Impact Shares, which launched this time last year, rolled out a wide array of activist ETFs. None of which has gotten past low single digit AUM. Let’s hope VEGN can do better.
|Ticker||Fund Name||Expense Ratio||AUM ($M)||Inception|
|WOMN||Impact Shares YWCA Women’s Empowerment ETF||0.76%||$6||Aug-18|
|NACP||Impact Shares NAACP Minority Empowerment ETF||0.76%||$2||Aug-18|
|SDGA||Impact Shares Sustainable Development Goals Global Equity ETF||0.76%||$1||Aug-18|
|CHGX||Change Finance U.S. Large Cap Fossil Fuel Free ETF||0.49%||$10||Oct-17|