Impact Shares has announced the launch of the Impact Shares Sustainable Development Goals Global Equity ETF (SDGA US) on NYSE Arca.
The fund provides exposure to a portfolio of 200 firms listed globally that are actively striving to help meet the United Nation’s Sustainable Development Goals.
Brought to market in collaboration with the United Nations Capital Development Fund (UNCDF), the ETF targets companies globally that are deploying capital to help achieve the UN’s Sustainable Development Goals (SDGs).
Adopted by UN member countries in September 2015, the SDGs are a set of 17 goals established to guide international cooperation on issues such as water sanitation, poverty, climate change and gender equality.
The goals, which are further broken down into 169 measurable targets, seek to promote active participation from governments, corporations and investors.
The fund’s strategy was originally developed with support from The Rockefeller Foundation’s Zero Gap initiative.
“We are proud to partner with Impact Shares and The Rockefeller Foundation to launch the first-ever UN ETF,” said UNCDF Executive Secretary Judith Karl. “This ETF offers those clients an exciting way to support the UN’s work while rewarding companies with accountable business practices and good management policies. We hope the ETF will encourage more companies to report on environmental, social and governance issues, as well as how their businesses are aligning with the UN SDGs.”
“The Rockefeller Foundation, through its Zero Gap innovative finance portfolio, is proud to support Impact Shares in their work to build investable solutions to mobilize private capital for social good in partnership with leading organizations like UNCDF,” added Saadia Madsbjerg, managing director at The Rockefeller Foundation. “This new social ETF not only addresses the estimated $2.5 trillion annual funding gap required to achieve SDGs in developing countries, it also provides UNCDF a critical new source of funding to continue its good work helping vulnerable people overcome many of the pressing global challenges that impact livelihoods.”
Ethan Powell, CEO of Impact Shares, commented, “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.”
The fund is achieves these goals by tracking the Morningstar Societal Development Index, an index developed through a collaboration between UNCDF, Impact Shares, Morningstar, and Sustainalytics, a analytics firm covering the ESG sector.
The index applies a four-level screen to the Morningstar Global Markets Large-Mid Index, which consists of approximately 97% of stocks by market capitalization from both developed and emerging markets globally and acts as its parent stock universe.
The first screen is against the UN Exclusionary Criteria as defined by the United Nations Development Programme in its 2013 Policy on Due Diligence and Partnership with the Private Sector, Section 3.1. Companies working in fields identified in this policy (i.e. nuclear weapons, alcohol, etc.) are excluded.
The second screen is for companies that are signatories to the UN Global Compact (a voluntary initiative where CEOs make commitments to implement universal sustainability principles and take steps to support UN goals, including the SDGAs). Companies that have not joined the Global Compact are excluded, leaving approximately 9,500 firms still eligible for selection.
The third screen excludes companies that have a high controversy rating, as calculated by Sustainalytics, on issues including business ethics, governance, social issues, environmental impact, supply chain, or community incidents.
The fourth screen applies 70 customized ESG indicators assessing company policies on issues such as bribery and corruption, employee working conditions, supply chain monitoring, and human rights, and assigns a score to each one. Companies with very low scores on any of these indicators are excluded, with companies remaining eligible receiving a composite score based on the aggregate of all 70 indicators.
Finally, companies with a higher share of revenues generated across 47 of the world’s least developed countries receive a “boost” through a multiplier that increases their composite score.
The 200 companies with the highest composite scores are included in the index and weighted through an optimization process that increases the weight of those with higher composite scores.
The ETF comes with an expense ratio of 0.76%.
Similar to Impact Shares’ first two ETFs, the issuer will donate the net advisory proceeds it receives from SDGA back to its collaborating partner non-profit, in this case the UNCDF.
The new Impact Shares fund is not the first ETF to base its strategy of the UN SDG’s. Launched in April 2016, the iShares Sustainable MSCI Global Impact ETF (MPCT US) tracks the MSCI ACWI Sustainable Impact Index which comprises companies that get the majority of their revenue from products and services addressing at least one of the UN SDG’s.
The iShares fund will adopt a new ticker (SDG US) in October. It is cheaper than the new Impact Shares ETF with an expense ratio of 0.49% and currently has around $40 million in assets under management.