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Investing With a Conscious With Goldman Sachs ETF

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This article was originally published on ETFTrends.com.

Exchange traded funds adhering to socially responsible investing (SRI) an environmental, social and governance (ESG) standards are proliferating. A compelling member of that fray is the Goldman Sachs JUST U.S. Large Cap Equity ETF (JUST) , which debuted last June.

Socially responsible investment strategies allow people to invest in companies that they may personally believe in, but it does not mean that investors have to give up on returns to combine their beliefs with their investments.

The Goldman Sachs JUST U.S. Large Cap Equity ETF will try to reflect the performance of the Just Capital’s US Large Cap Diversified Index, which based on the Russell 1000 benchmark and targets companies that score well on environmental, social and governance metrics.

“We have this big disconnect of what the American public thinks and what corporate boardrooms, the C-suite, are actually doing,” said Paul Tudor Jones, according to DealBreaker. “The interesting thing is there’s a way to bridge that gap where everyone wins.”

A Growing Theme

Investing based on environmental, social and governance (ESG) principles is a theme garnering increased attention, but in the U.S., the 50 or so ESG ETFs have just over $6 billion in combined assets under management. Last month, BlackRock, the largest ETF issuer, said it sees the ESG fund universe jumping to $400 billion over the next decade.

To screen for its ESG-focused components, Just Capital conducts an annual survey taken from the American public and analyzes 120,000 data points across 85 unique metrics to score companies based on how they perform on key issues prioritized by the public. For instance, companies are ranked from worker issues, like providing a living wage and workplace safety; to customer concerns, such as privacy protection and truthful advertising; to environmental impacts, including minimizing pollution and resource efficiency. Companies are ranked by overall score, and the top 50% are selected and weighted by market cap.

“So what JUST Capital does is we rank the Russell 1000 companies 1 to 1,000 every year according to those metrics…. I don’t know if I want to see a legislative outcome for this. I’d love to see this happen organically,” said Tudor Jones, according to DealBreaker.

The indexing methodology hopes to capitalize on the fact that companies found in the socially responsible index historically pay better, create more jobs, pay fewer fines, give twice as much to charity, emit less greenhouse gas, and have higher return on equity, compared with the rest of the Russell 1000.

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