The socially responsible investment theme has been gaining momentum in the investment community, and Global X is capitalizing on the rising popularity with a new exchange traded fund based on well-managed companies that achieve positive outcomes.
The recently launched Global X Conscious Companies ETF (KRMA) tries to reflect the performance of the Concinnity Conscious Companies Index, which tracks companies that achieve financial performance in a sustainable and responsible manner and exhibit positive Environmental, Social and Corporate Governance (ESG) characteristics. KRMA has a 0.43% expense ratio.
The strategy draws on dozens of sources to identify companies that have demonstrated a long term focus on creating positive outcomes for five stakeholder groups, including employees, customers, communities, suppliers, and stock and debt holders, according to Global X.
“Investors are increasingly looking at socially responsible investing not only as a values-driven decision, but also as one that can potentially lead to better long term returns,” Alex Ashby , director of product development at Global X, said in a press release. “Companies that demonstrate a commitment to the Multi-stakeholder Operating System tend to treat each of their stakeholders well and take a longer term view of corporate performance.”
KRMA’s underlying portfolio undergoes a three-step screening process that analyzes companies’ adherence to academically-backed Multi-stakeholder Operating System to identify those that operate in a sustainable and responsible manner.
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Firstly, the index uses forty information sources and public rankings to identify and evaluate companies based on ability to achieve positive outcomes across all five stakeholder groups, such as employee productivity, customer loyalty and corporate governance.
In the second step, the index uses composite analysis to apply deeper evaluation based on employee engagement, executive integrity, customer relationship quality, labor and human rights, and quality of financial reporting.
Lastly, a screen for consistent achievement is applied – a company must be qualified for inclusion in the Multi-stakeholder Operating System investable universe for at least three consecutive years. The index is then equally weighted.
Sector allocations include consumer discretionary 20.5%, industrials 17.5%, tech 17.3%, consumer staples 12.2%, health care 10.1%, financials 9.1%, energy 5.0%, materials 3.5%, utilities 2.8% and telecom 1.9%.
KRMA is the latest in a number of socially responsible ETFs to recently hit U.S. markets. For instance, the iShares MSCI EAFE ESG Select ETF (ESGD) and i Shares MSCI EM ESG Select ETF (ESGE) , which track developed and emerging market companies with high ESG ratings, began trading at the end of June.
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