China ETF CGRO Takes “America-First” Approach to ESG

The fund targets investors who shun China's geopolitics.

Aiming to lure investors scared off from investing in China, the recently launched Greater China Growth ETF (CGRO) filters out firms that run counter to “American values” and geopolitical interests.

The first exchange-traded fund from Core Values Alpha debuted Oct. 17. CGRO is actively managed and invests in companies with exposure to “greater China,” which its prospectus says includes mainland China, Taiwan and Hong Kong. The fund filters out firms the company believes are involved in suppression of civil liberties or firms have close ties to the Chinese military. 

“The genesis of the fund is talking to American endowments, pensions and other institutional investors not even bringing up China to their investment committee due to these non-financial issues,” CVA portfolio manager Ben Harburg said in an interview. “We can access large pools of capital if we can assuage those fears.” 

China and ESG

Harburg said that while CVA doesn’t use the term ESG (environmental, social and governance investing), social and governance concerns play a part in their unique geopolitical screen. CVA describes the fund as investing in China with an “America-first lens,” invoking the slogan popular with the American political right, which has criticized investment funds that weigh non-financial considerations. 

The fund’s expense ratio is 0.75% after fee waivers, higher than average for active ETFs. Harburg says much of the fund’s expenses come from work required for due diligence in geopolitical screening. 

Despite these difficulties, Harburg remains bullish on China. He contends in the fund’s press release that no place will become the “next China,” and that there are limits to the current trend of diversifying supply lines outside of the nation because no other country has an industrial workforce of similar size and training. 

Looking forward, Harburg says that CVA plans to launch ETFs in the first half of 2024 focused on India and reshoring. 

Contact Gabe Alpert at [email protected]