Newcomer Adasina Social Capital, an investment and financial activism firm, launched an ETF that takes traditional ESG a step further to embrace social justice. The new Adasina Social Justice All Cap Global ETF (JSTC) is technically actively managed, but is guided by an index in its investment practices.
The fund comes with an expense ratio of 0.89% and lists on the NYSE Arca.
Rachel Robasciotti, co-founder and CEO of Adasina, notes that although she believes in index-based investing, the firm went with active management because of the need to respond quickly to developing situations. Some social justice issues are very fast-moving, and if “social justice groups are asking us to divest, we don’t want to tell them we’ll do that at the next rebalance,” she said.
However, the index is the primary guide for the portfolio, with the active management coming into play when current events raise immediate issues, according to Robasciotti.
Social Justice Criteria
JSTC’s related index has a strong focus on racial, gender, economic and climate justice while incorporating traditional ESG metrics as well.
“We designed it as an equity replacement for people who hold social justice values,” said Robasciotti. “Primarily what’s happening is we’re creating a bridge that hasn’t existed before between social justice movements and Wall Street.”
“By sourcing our data straight from impacted communities, through close relationships with social justice leaders, we have the unprecedented ability to direct investor capital to the issues most critical to long-term change—this approach gives us a data advantage relative to other solutions. We created the Adasina ETF to give every investor the opportunity to invest in line with social justice values, in almost any account, while still maintaining their relationship with their financial advisor,” she said
The firm works closely with social justice groups, described by Robasciotti as “organizations that are by and for the communities facing the issues,” to develop and maintain the index and develop data sets that are relevant to the fund’s goals. Adasina makes most of that data public, often in the form of exclusion lists targeting such topics as forced arbitration and sub-minimum wage pay.
“The best way to organize other investors is through data,” she said.
A team of social justice activists also advises the firm on the portfolio’s holdings.
Excluding Bad Actors
For the index, in the case of a core concern, that means that the most egregious actors are excluded, while other companies are alerted and given the opportunity to change their practices, Robasciotti notes.
“You have to give companies an opportunity to change. That’s kind of the whole point,” she said.
Her firm provides a matrix on its website that ranks “extractive” business practices that prioritize financial gains over social impact as the least desirable, while “regenerative” practices that focus on social impact and building community wealth and assets are ranked as the most desirable.
“For investing and running a business, extractive approaches may make for short-term success, but regenerative and sustainable makes for long-term success,” Robasciotti said.
Adasina has run a similar strategy as a separately managed account for three years, and it benefited in 2020 from excluding companies with involvement in fossil fuels, she notes. Other flashpoints that can result in immediate exclusion from the index include the use of forced arbitration as well as involvement in the tobacco or private prison industries among other business activities and practices.
“We believe that social justice movements could very possibly be early indicators of material risk,” Robasciotti said of the investment argument for the fund.
As of the end of November, the index included 891 components drawn from 42 different countries, the prospectus says. The top holdings in the fund include Visa, Anthem and ASML Holding, according to its website, while the largest countries represented in the index are the United States, Japan and Canada.
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