Humankind Investments, a New York-based manager of socially responsible investments, has opened its doors to the mainstream with the launch of its first ETF.
Humankind’s debut ETF focuses on companies that it determines are making the greatest contribution to society.
Founded in 2019 and overseeing around $100m in client assets, Humankind was founded by former Vanguard analyst James Katz.
Its debut ETF, the Humankind US Stock ETF (HKND US), has listed on NYSE Arca and is based on the proprietary Humankind US Equity Index
The fund provides broad exposure to US-listed companies that are considered to be making the greatest contribution to society by promoting healthier, safer, longer and more equitable lives.
Index methodology
The underlying index is derived from a universe of US-listed stocks and real estate investment trusts with market capitalizations greater than $500 million and minimum average daily trading volume of $1m.
The index selects the top 1000 eligible stocks that have a positive ‘humankind value’ score, a proprietary metric that measures a company’s economic value based not only upon its financial performance but also on the perceived costs and benefits to society from the everyday conduct of its business.
Humankind determines the component values of this calculation by means of research that synthesizes a broad range of independent data sources such as nationally recognized data providers, scientific and academic papers, data gathered by government agencies, NGOs, other research entities, as well as financial statements and other public disclosures released by companies.
Constituents are weighted in proportion to their humankind value with those having a higher positive value receiving a higher weighting in the index, subject to a maximum individual constituent weight of 4% and a maximum individual sector weight of 20%.
The index is rebalanced quarterly and reconstituted annually. It is independently calculated by Solactive.
At launch, the top ten constituents are Alphabet (4.21%), Verizon (3.98%), Microsoft (3.81%), Corteva (3.34%), Deere & Company (3.24%), Apple (3.24%), HP (2.13%), Johnson & Johnson (1.93%), Pfizer (1.75%) and General Electric (1.68%).
Holistic approach
The fund launch marks the first in a series of socially responsible ETF which, according to Humankind, are designed to take a more quantitative and holistic approach to environmental, social, and governance (ESG) investing.
“Amid the increasingly crowded sustainable investing landscape, we launched Humankind to bring a fresh, unified, scientific approach to the ESG discourse. While many managers develop ESG strategies as just one part of a broader platform of active and passive offerings, Humankind is exclusively focused on socially responsible investing,” said Humankind founder and CEO James Katz.
“We developed our Humankind Value score with the belief that traditional investment analysis, with its typically narrow focus on standalone financial performance, fails to fully capture a company’s ability to remain sustainable and competitive in the long run. By concentrating our investments in the companies that maximize value across a wider range of key stakeholders and thematic issues, we aim to promote the best possible outcomes for people as both investors and as human beings,” added Katz.
ESG ETFs are increasingly attracting investor interest. According to data from FactSet, investors allocated a record $27.4 billion into US-listed ETFs that focus on ESG practices in 2020.