ImpactAlpha, June 23 – Divest or engage? In the running debate over public-equities impact strategies, engagement is gaining ground.
In the proxy season just ended, shareholders notched historic victories in prodding companies to improve their practices around diversity, lobbying, plastic pollution and, especially, climate. The capper: the surprise success of Engine No. 1’s campaign to shake up the board at ExxonMobil.
The activist investment firm is leveraging that victory to launch an exchange-traded fund, the Transform 500 ETF, which will begin trading today under the ticker VOTE. Instead of screening out companies or sectors, the standard market-cap weighted index fund of the 500 largest U.S. stocks will attempt to drive impact through proxy voting and activist campaigns.
“We want to be impact investors defined not by what we hold, but what we do as active owners,” Engine No. 1’s Michael O’Leary told ImpactAlpha.
ESG economics
Engine No. 1’s approach could pressure other asset managers to raise their “stewardship” game. In an analysis of sustainable funds’ voting records in last year’s proxy season, Morningstar found that some of the largest environmental, social and governance funds, including Vanguard’s FTSE Social Index and BlackRock’s iShares ESG Aware ETF, supported less than one in five key ESG shareholder resolutions.
“Racial equity issues are economic issues,” says O’Leary. “Worker issues are economic issues. Investing in your customers, communities, and the environment—these are all economic issues.”
The Transform 500 ETF, which is led by Yasmin Dahya Bilger and has an expense ratio of .05%, attracted $100 million from institutional investors ahead of its public launch.
