Originally published on Ecopreneurist.
Yesterday Etho Capital, in partnership with Factor Advisors, a subsidiary of ETF Managers Group, successfully launched the world’s first diversified, socially responsible and fossil-free exchange-traded fund (ETF) on the New York Stock Exchange.
The ETHO ETF is based on the Etho Climate Leadership Index (ECLI), an index of 400 companies announced in October that is completely divested of fossil fuel companies, rigorously screened for sustainability criteria, and constructed of the most climate-efficient companies in each sector, offering investors a product with broad diversification while remaining socially and environmentally responsible. It is part of a series of financial products that will be released by Etho Capital, which is dedicated to taking sustainable investing mainstream.
The ETHO ETF is composed of U.S. public equities in the ECLI, which combines quantitative climate emissions data with socially responsible investing expertise to create a diversified index that is optimized for both sustainability and financial returns. The ECLI has been closely studied to understand how it would have performed historically compared to major relevant indices. In 10-year back tests, the ECLI outperformed the S&P 500 Index on a risk-adjusted basis while reducing greenhouse gas pollution per dollar invested by 50 to 80 percent.
“ETHO is a not just a new category of ETF, it is a discerning screen that redefines what an ETF can do and impact. Like all great investments, it has a clear-eyed view of the future of money and people,” says Paul Hawken, long-time environmentalist, activist and writer.
The launch of the ETHO ETF fills a critical void in the fossil-free investment sector, which is the fastest-growing investor movement in history. Foundations, endowments and trustees are considering ESG metrics as part of their fiduciary duty more often when making investment decisions, and individuals are increasingly looking to align their investments with their values. The ETF will serve the explosive growth of the movement to divest portfolios from fossil fuel companies and invest in a clean energy future.
In September, institutions and individuals representing more than $2.6 trillion in assets under management were committed to fossil fuel divestment. This number is likely to grow, as 84 percent of Millennials say they favor ESG investing, and roughly $41 trillion will pass to Millennials from baby boomers over the next 35 years. Further pointing to the the growing trend of socially responsible investing, $59 trillion has been committed to the U.N.’s Principles of Responsible Investing through more than 1,300 signatories.
Global leaders are preparing to address greenhouse gas reductions in Paris at COP21, and investors are increasingly aware of the risks of portfolio exposure to fossil fuel companies. Two major, recent examples that emphasize these risks include President Obama’s rejection of the proposed Keystone XL pipeline and the New York attorney general’s new investigation of Exxon Mobil for potentially misleading the public about the impacts of climate change. Etho Capital controls these kinds of risks through its fossil-free investing products that focus on the most climate-efficient and socially responsible companies.
“Investors of all ages are increasingly concerned about climate change, but younger investors are especially focused on aligning their portfolios with their long-term sustainability because they have the most to lose from the ripple effects of a rapidly warming world,” says Etho Capital founder Ian Monroe, who is a lecturer on climate change at Stanford University and founder of the carbon footprint tracking app, Oroeco. “At Etho Capital, our goal is to empower everyone to invest in climate sustainability and social responsibility while gaining competitive financial returns. The ETHO ETF combines all these elements and makes them accessible to the full spectrum of investors, ranging from large institutions to college students investing for the first time.”
Etho Capital is a mission-driven investment management company committed to helping solve climate change by bringing sustainable investing mainstream. Etho’s mission is to build the world’s best fossil free investment solutions by providing superior environmental, social, and financial performance. Etho’s innovative and thoughtful approach combines quantitative sustainability science and stakeholder expertise with the diversified returns and risk management of index investing. It is pending its B-Corp certification.
Reprinted with permission.