view transcript

Katherine: Ethan Powell, CEO of impact Shares, joins me to discuss the one year anniversary of the NAACP minority empowerment ETF. So let's start with that. Can you explain what the Impact Shares' NAACP minority empowerment ETF is?

Ethan: I can, Katherine, it is kind of a mouthful, but uh, it's important to include all of those organizations because it's an ESG fund. But the premise is that with generic ESG strategies where you have a corporate citizenship score of a A+ versus a B-, and it factors in 500 different metrics, and very well-intended asset managers are sort of figuring out who a good corporate citizen is. You lose a lot in the communication within the investor base and people are really trying to reconcile their system of beliefs back to some of these ESG strategies. And by including the NAACP, really what we're asking is what does a good corporate citizen look like through the lens of the NAACP specifically as it relates to minority empowerment here in the U.S. So it's very targeted, it's a single social issue, equity market proxy. So you still get your broad equity market exposure, but you know exactly what your capital is going towards improving society in which direction we're steering society.

Katherine: As I said, it's been a year. So how's it going so far?

Ethan: It's going great. Um, you know, our performance over the trailing 12 months is a little over 10.2, which the categories returned 7.7. That's the Morningstar large blend domestic category. So from a financial perspective, we're actually ahead of where we would have thought. Again, we're trying to just have broad equity market exposure. We beat our category. We're in the top core tile of our category, which includes actively managed funds as well. Um, we received a five globe rating for Morningstar, which puts us in the fourth percentile relative to broad ESG standards. Um, and you know, we've received some industry awards, most innovative ETF issuer, um, best new ESG fund. So, so far so good.

Katherine: So I've got to say based off of that, it sounds like if I'm a millennial and I'm looking to invest sustainably or invest in matters that matter to me, that this is a good way to go cause it's going to profit me in the long term.

Ethan: Well that's exactly right. So, so if you can both generate a competitive return and be very intentional with the social implications of your capital allocation, it's really a win-win. Right. And um, you know, we, we say intentional because the goal of Impact Shares is to have every social issue reflected with a separately invested or investible fund that represents a collaboration with a leading social advocacy firm. So what that lets your listeners do, uh, is to create bespoke, socially respectful, responsible investment portfolios that are reflective of their personal social priorities. Not some arbitrary idea of a good corporate citizen.

Katherine: As my mom would say, it's putting money where my mouth is.

Ethan: Exactly.

Katherine: Okay. So you explain the differences between SRI ESG and impact investing?

Ethan: So there are a lot of acronyms in this space, right? So socially responsible investing was an older term. ESG is environmental, social, governance, which kind of tries to break down some of the different elements of social responsible investing. Um, and then impact investing is really speaking to how your capital actually has an impact in the world around you. I think what's really important isn't necessarily the terminology rather, it's the idea that in a traditional risk return diagram where you have an efficient frontier, there's really a third axis, right, which is there's risk, return and social implications to my investment. Understanding those social implications, even if you want it to be sort of a bad actor if you will, and you're investing in um, you know, private prisons, tobacco sin stocks, you should expect a higher risk return, um, profile relative to uh, you know, a green oriented company or a company that is doing sort of good in addition to doing well.

Katherine: Now, if I'm an investor and I'm looking at companies, but I want to be more purposeful about where I'm putting this money, what, how can investors be more mindful of those companies?

Ethan: Well, I think it first starts with having a good self awareness and understanding of what you are social priorities are. Then when you're evaluating a manager, right? Just as you would evaluate a manager's ability to, to deliver financial outcomes based off of people process philosophy, you should be evaluating them on the ability to deliver social outcomes as well. And if that's aligned with your expectation, then great. If it's not, you really need to probably look for different managers.

Katherine: Thank you, Ethan.

Ethan: Thank you, Katherine.

Looking to invest sustainably?

Investors who are seeking to be more conscious about the names in their portfolios can invest in ETF's that follow the values that they believe in. Here's why investors should consider adding these ETF's to their portfolio.

ESG, or environmental, social and governance, investing is for investors looking to invest in companies that share their ideals--whether they care about the social impact, the environmental impact, or the governance impact of the company. 

Ethan Powell, CEO of Impact Shares, helped to launch an ETF last year called the Impact Shares NAACP Minority Empowerment ETF (NACP) . 

He explained the name to TheStreet

"It is kind of a mouthful, but it's important to include all of those organizations because it's an ESG fund. But the premise is that with generic ESG strategies where we have a corporate citizenship score of A plus versus a B minus and it factors in 500 different metrics and very well-intended asset managers are sort of figuring out who a good corporate citizen is. You lose a lot in the communication within the investor base and people are really trying to reconcile their system of beliefs back to some of these ESG strategies. And by including the NAACP, really what we're asking is what does a good corporate citizen look like through the lens of the NAACP, specifically, as it relates to minority empowerment here in the U.S. So it's very targeted, it's a single social issue, equity market proxy. So you still get your broad equity market exposure, but you know exactly what your capital is going towards improving society in which direction we're steering society," explained Powell.

But he also dug into why investors should consider ESG ETF's.

Related. Why Investors Interested in ESG Investing Should Consider This ETF

Investing With a Conscience Can Actually Pay Dividends

Watch the full video for more.