The Vegan ETF wants to hit the market

6 years ago - Published in Finance

Socially responsible investments, such as environmental, social and governance (ESG) exchange-traded funds (ETFs) are not relatively new, but the concept is still struggling to break into the realm of the mainstream, particularly in the current risk-on investing landscape where major indexes like the S&P 500 are hitting record highs.

One firm, Beyond Advisors, is looking to differentiate itself among ESG investing through specificity as it filed with the Securities Exchange Commission (SEC) to bring the U.S. Climate Vegan ETF to the industry.

The fund seeks “to address the concerns of vegans, animal lovers and environmentalists by avoiding investments in companies whose activities directly contribute to animal suffering, destruction of the natural environment and climate change,” according to its prospectus.

The fund’s underlying index, which was built by excluding companies from the Solactive U.S. Large Cap Index, cuts out about 40% of the market capitalization of the benchmark. The gauge was created by three European vegan finance professionals from Beyond Advisors, the research arm of impact investing platform Beyond Investing, according to a company press release.

A new fund from Beyond Advisors seeks “to address the concerns of vegans, animal lovers and environmentalists by avoiding investments in companies whose activities directly contribute to animal suffering, destruction of the natural environment and climate change,” according to its prospectus.
The Solactive U.S. Large Cap Index was created by three European vegan finance professionals from Beyond Advisors.
Bloomberg News

Through its screening, the U.S. Vegan Climate Index participates in no business activity that harms animals. “As compared with an exposure to the Solactive U.S. Large Cap index, an investor in this new index will avoid funding the slaughter of 13 animals a year for every $1,000 invested,” the company said in the release.

Investors will have to pay handsomely for the privilege of buying in. The fund is charging a management fee of 60 basis points, or $6 for every $1,000 invested, which is “triple the asset-weighted average ETF fee,” said Bloomberg Intelligence analyst Eric Balchunas.

With $6 billion worth of capital in ESG funds, it still represents a pittance with respect to a $3.5 trillion ETF industry. By focusing on the specifics of vegan investing, the U.S. Climate Vegan ETF hopes to capture more market share by honing in on investors who are privy to these social issues.

“Clearly the ESG label isn’t doing the trick,” Balchunas said. “So it is no surprise that issuers are trying a different tact in being more clear and specific in the names of the products in an effort to excite certain types of investors.”

Vanguard, the second largest ETF issuer in the world, recently rolled out the cheapest ESG fund available, and it’s now seen as something of a bellwether for the strategy. The Vanguard ESG U.S. Stock ETF (ESGV) charges just $1.20 per $1,000 invested. If it doesn’t gain traction in a year or two, it would demonstrate the limited potential for ESG ETFs in the U.S., Balchunas said.