The conversation about racial equality and social justice is gaining momentum in the U.S., points that should remind all Americans that change comes in many forms, including how we invest.
What Happened: When it comes to investing with a purpose, many investors think of environmental, social and governance (ESG) exchange-traded funds. They're on the right track, but an additional step can be taken with the increasingly relevant Impact Shares NAACP Minority Empowerment ETF NACP.
NACP, which is nearly 2 years old, follows the Morningstar Minority Empowerment Index and holds 175 stocks.
Why It's Important: Vital to getting more eyeballs on NACP is that the fund favorably answers an oft-asked question about ESG funds. That being are investors leaving money on the table by favoring virtue over standard index ideas? In the case of NACP, the answer is no.
This year, the fund is higher by 2.57%. That may not sound like much, but consider the following: the S&P 500 is still in the red year-to-date and NACP's peak-to-trough decline this year was not as severe as the S&P 500's. Over the past month, NACP is higher by 10.62% compared to 9.06% for the U.S. equity benchmark.
“Change has to come from many directions. If you are fortunate enough to be an investor, keep in mind that the way you invest matters. You have the means to contribute to change via your investments,” said Morningstar analyst Jon Hale in a recent note.
What's Next: NACP emphasizes equality in tangible fashion, screening member firms based on board diversity, internal discrimination policies, diversity programs, racial diversity in supply chains and other factors.
With over half its weight allocated to beloved sectors, such as technology, health care and communication services, and home to the likes of Microsoft MSFT and Apple AAPL, among other favored equities, NACP functions not only as an avenue to get more folks interested in sustainable investing, but as a core holding as well.
Additionally, there's something to the rising cache of sustainable investors.
“Through engagement and proxy voting, sustainable investors can push for change at the corporations they hold in their portfolios,” notes Hale. “Sustainable investors press companies on their diversity and inclusion policies, on the composition of their boards, on the way they compensate employees--particularly lower-wage workers whom we are more fully recognizing as essential during the pandemic, on labor relations generally, and on where corporate lobbying and political expenditures go.”
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