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Minority-focused ETF created with NAACP vision in mind

Marvin Owens, Impact Shares Chief Engagement Officer, sits down with Yahoo Finance Live to talk about ESG investing that fits with the NAACP's goals and screening company values for the ETF.

Video transcript

EMILY MCCORMICK: Welcome back. Interest in Environmental, Social, and Governance, or ESG, investing has grown dramatically in recent years, as traders consider putting capital to work in areas that promote a sustainable and equitable future. One fund focused on investing for social advocacy and racial justice is the Impact Shares NAACP Minority Empowerment ETF.

Marvin Owens, Impact Shares chief engagement officer, joins us now for more. Marvin, thank you so much for your time this afternoon. Looking at this ETF, the ticker is NACP, and many of the top holdings are companies very familiar to many investors and that are also some of the top components in the S&P 500, like Apple, Microsoft, Amazon, and Tesla. Tell us what Impact Shares is screening for when considering what companies to include in this fund.

MARVIN OWENS: Thanks for the question. And it's great to be here. I think that we're focused in on what is most important related to our advocacy partners. Impact Shares created this ETF in partnership with the NAACP. The NAACP has more than 100 years of advocacy history behind it, advocating for racial equity. It began with the corporate scorecard that was a couple of decades old, in which we took that strategy and applied it to publicly traded companies.

So we're looking at things like board diversity, supplier diversity, freedom of association policies, gender pay disclosure information. We're also looking at things like media ethics, product offering ethics, and we're excluding those things like fossil fuels and companies that profit from riot gear and other sort of exclusions. But the idea here is to be in alignment with the mission of the NAACP.

BRAD SMITH: And so have you had to do any rotation? And in the future, how do you continue to track where companies stand on some of the promises that they've made with regard to diversity, equity, and inclusion, and where they're continuing to champion the measures that are necessary to see this through to fruition?

MARVIN OWENS: Yeah, that's a great question. Two things come up. I think the one thing is that we are using data that is derived from our partners at Morningstar and Sustainalytics. Sustainalytics is a leading ESG data provider, and we're constantly getting updated information about what companies are doing, what's happening with them in terms of what they're doing around these kinds of commitments that they've made publicly.

The key here is to align those public pronouncements with actual change internally. And that's where the engagement of a partner like the NAACP becomes most important. The NAACP is constantly engaging with corporate America to ensure the fact that they're creating policies and implementing programs that are in alignment with the concerns around racial equity.

EMILY MCCORMICK: You also in addition to rotating companies and considering how they're making good on some of their commitments, you also previously updated the indicators that you used to assess these companies. And recently, your updates have included looking for companies with media ethics progress, human rights progress, advertising ethics, and more. I'm wondering, how often and what tends to catalyze these updates in terms of the parameters that you're looking for to evaluate your companies as well?

MARVIN OWENS: Yeah, again, that goes back to the partner that we have in the NAACP. That update, really, it was the result of the engagement work of the NAACP. We can go back a couple of years to the engagement that the NAACP and other civil rights organizations had with companies like Facebook in which there was a real concern around hate speech on their platform. And so these civil rights organizations really sat down with the leadership at Facebook and began to ask the kind of questions around what could be done to be better at making sure that that hate speech was not on their platform.

What resulted was that we looked at our factors and social factors that we were looking at and said, we really do need to take a look at this. Previously, we had not looked at that as closely as we had most recently. But I think the reality is as the NAACP becomes more clear in terms of the kind of work that they're doing, the result of their engagement, that our social factors begin to reflect those evolutions.

BRAD SMITH: The social factors, they also kind of range across a bevy of different not just companies, but also subsectors as well and the responses that those industries and sectors are having to issues that also do have an impact on equity and inclusion. And if we even think about climate all the way to housing, where are some of the other areas that you're kind of prioritizing in the future where there could be additional ETFs that stem from a very similar environmental and social governance initiative?

MARVIN OWENS: That's a great question. We have about-- we have five ETFs right now on our platform. And most recently, we launched over the summer, OWNS, O-W-N-S, which is a mortgage-backed securities ETF, that's really focused on closing the racial wealth gap through Black homeownership. This is another one of those opportunities that we're saying that you can take the public markets and capital markets to really move the needle on the social concerns that we care about and that make our country and society better.

We have an SDGA fund that is focused on sustainable development goals. We launched at Glasgow Net Zero, fund NTZO, that it's really about reducing carbon and really making those climate commitments that are most important to not just our country, but the entire world. So I think that there's plenty space to really develop what we call bespoke financial products that are in alignment with the leading social and environmental advocacy organizations. So we're looking for a number of new opportunities to develop new products in the future.

EMILY MCCORMICK: What kind of returns have you been seeing recently for the NACP ETF and Impact Shares' other ETFs more broadly that you were just talking about? And how do you expect these funds to perform relative to the broader market in the future as, again, impact investing, ESG investing, become something more and more important to many investors?

MARVIN OWENS: Yeah, I think it's-- thanks for raising that question. We've seen our products perform very well. I mean, we're talking between 20% and 30% returns. We are doing extremely well. What we're trying to do is to ensure the fact that the investing audience understands that you can align capital with cause, and you don't have to make a concession about returns. You can do well and do good at the same time. And our products are a good example of why that's the case.

EMILY MCCORMICK: All right, we'll leave it there for now. Marvin Owens is Impact Shares chief engagement officer, and we thank you so much again for your time this afternoon.