On Friday, new ETF sponsor Beyond Advisors IC registered for a first-of-its-kind socially responsible ETF, the US Vegan Climate ETF, which would select companies according to the ethical guidelines consistent with veganism.
The proposed ETF, which would list on the NYSE Arca, is part of the ETF Series Solutions Trust, which is associated with U.S. Bancorp and Exchange Traded Concepts, a white-label issuer based in Oklahoma City, Oklahoma.
No ticker for the ETF has yet been named.
ETF That Does No Harm
The proposed ETF would track the Beyond Advisors US Vegan Climate Index, a passive, rules-based benchmark that screens the Solactive US Large Cap Index according to "vegan and environmental criteria," according to a May press release announcing the index's launch.
Excluded from the index are companies whose activities "directly contribute to animal suffering, destruction of the natural environment, and climate change," according to the prospectus.
That includes companies that engage in animal testing, animal-derived agriculture or products, the use of animals for sport or entertainment, or animal-based research and genetic engineering.
The index also selects companies based on their environmental impact. Companies engaged in the production and refining of fossil fuels, or even the use of fossil fuels for energy production, are excluded from the benchmark. So too are companies who significantly negatively impact the environment, through a high carbon footprint or habitat destruction, or so on, unless that company takes steps to mitigate and address those impacts.
The index also implements several social screens common to ESG ETFs, including the exclusion of tobacco stocks, defense and military firms and companies that contribute to human rights abuses and/or child/forced labor.
In addition, any financial firms, accounting firms and business service providers who work with excluded companies may also be excluded, if a disproportionately high amount of their total revenue comes from those relationships.
13 Animals Saved Per $1,000
In total, these screens cut roughly 41% of the market capitalization of the Solactive US Large Cap Index.
The remaining companies, about 300 or so, are weighted according to their market capitalizations. Individual company weights are capped, such that no one stock may exceed 5% of the index; and such that individual industry weights match those of underlying Solactive US Large Cap Index to within 0.5%.
The resultant index represents a portfolio of stocks that is significantly more carbon efficient, waste and water efficient, and more proactive in dealing with environmental solutions, according to the index's website.
Beyond Advisors also claims that an investment in the index's portfolio will save 13 animals from slaughter annually for every $1,000 invested, as compared to the Solactive US Large Cap Index, though it is unclear how those figures are calculated.
Currently the US Vegan Climate index is concentrated in financial stocks. However, FAANG stocks Apple (AAPL), Microsoft (MSFT) and Alphabet (GOOGL) comprise the top three constituents, for a total of 12%.
Hefty Price Tag
Beyond Advisors is a three-person team of European investment professionals who also identify as vegan. It's part of the Beyond Investing vegan investing platform.
The firm's proposed ETF would cost 0.60%, placing it among the more expensive socially responsible ETFs, where the average expense ratio has been coming down in recent months as large ETFs cut their fees. The average cost for a socially responsible ETF today is 0.44%.
Currently there are 75 socially responsible ETFs holding assets under management of $7.6 billion.
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