ESG: ‘Watershed moment’ for investing in social advocacy, says NAACP ETF creator

The nationwide demonstrations for social justice could bring about a sea change in corporate America, and not just with protests.

Investing for social advocacy could get a meaningful boost as the Black Lives Matter movement takes hold and Wall Street realizes there’s more to be done across the board to increase and promote diversity, Marvin Owens, senior director of economic programs for the NAACP, told CNBC’s “ETF Edge” on Monday.

Owens is co-creator of the Impact Shares NAACP Minority Empowerment ETF (ticker NACP), a one-of-a-kind fund focused on racial and ethnic diversity.

The NAACP has been scoring companies for at least 25 years based on factors such as C-suite hiring, supplier diversity and community engagement, Owens said. Now, it shares that data with Impact Shares and Morningstar, the index provider, to help shape its portfolio. In return, all of Impact Shares’ net advisory fees go back to the NAACP.

This ETF is “the next evolution in our corporate advocacy work around closing the wealth gap for African Americans in this country,” Owens said. “In the current environment where everyone is kind of trying to figure out ‘how can I get involved, what can I do,’ capital has the power to make social change.”

“This is really a watershed moment, and I think we’re just at the beginning of it.”

Marvin Owens

Senior Director of Economic Programs, NAACP

The best information on racial and ethnic empowerment comes from companies that regularly report their data, Owens said, which is why the NACP ETF’s portfolio resembles that of a lot of other ESG funds, or funds focused on environmental, social and governance issues.

Amazon is the No. 1 holding at 7%, followed by Microsoft at 6.5%, Apple at 6%, Alphabet at 5% and Johnson & Johnson at nearly 3%.

But transparency is key, and the goal is to make companies want to be transparent about their practices and engage with organizations such as the NAACP to improve them, Owens said.

“The reality is investors are going to be able to push a process that results in real change in social justice,” he said. “I think companies are getting the message as well because as they really grapple with how to show up the right way in this moment, they’re being challenged by the NAACP and other organizations to make sure that the rhetoric that they’re using around making commitments, public commitments, to standing against racial discrimination is actually getting played out and lived out in the way they do business internally.”

“I think this is really a watershed moment, and I think we’re just at the beginning of it,” Owens said. “I think investors are going to be raising their voices in more powerful ways in the future around social issues.”

Ethan Powell, founder and president of Impact Shares and a co-creator of the ETF, echoed Owens’ point, saying in the same “ETF Edge” interview that the fund is a way to “provide incentive for corporate America to report.”

“It’s one thing to be in an ESG fund that is trying to be all things to all people because it’s hard to communicate what that actually means. It’s a very different thing to be able to say, ‘We are in the NAACP Minority Empowerment fund because these are the things that the NAACP cares about and we do a better job relative to our competitors,'” Powell said.

“Our goal is to have inclusion in this fund become a compelling point of differentiation for corporate America and that’s when it starts to justify the cost of compiling and reporting some of this data,” he said. “Because if not, you’re going to get left behind by your competition in a world that is increasingly difficult to separate your products and services in.”

The NACP ETF has just over $4 million net assets under management and costs 76 basis, or 0.76%, to own. It is down about 1% year to date versus the S&P 500’s 5% loss over the same time frame.

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