ETF's Making a Difference for Non-Profits - Interview with Ethan Powell, Founder of Impact Shares
I recently posted about Impact Shares being awarded Most Innovative ETF by ETF.com. I interviewed Ethan Powell, founder of Impact Shares, to learn more about its ETF products. While learning about Impact Shares’ ETF offerings was interesting, as a movie fan, I was also interested to learn that Powell’s sister-in-law is Julie Powell, the blogger who inspired Nora Ephron’s hit movie, Julie & Julia. Chris Messina (one of my favourites from The Mindy Project) plays Ethan’s brother in the movie. Upon this information, I ended up re-watching the movie this past weekend in a new light.
Back to impact investing and ETF’s (if you aren’t sure what an ETF is, click here). Over Powell’s 25 years in the financial services business, he has seen a large shift in the market as investors move from active to passively managed funds. Passively managed funds and ESG (environmental, social and governmental) strategies have grown from $2.5 trillion to $12 trillion. Powell has witnessed people losing confidence in Wall Street’s ability to generate actively managed returns along with a desire from investors for more social awareness in the make-up of their investments. These were among the factors that led to the creation of Impact Shares.
Impact Shares, the first non-profit ETF platform, leverages existing social groups to develop specific social screens for its ETF products. It currently has three ETF’s: Impact Shares NAACP Minority Empowerment ETF (NYSE: NACP), Impact Shares YWCA Women’s Empowerment ETF (NYSE: WOMN) and the Impact Shares Sustainable Development Goals Global Equity ETF (NYSE: SDGA). Net proceeds go directly back to the non-profit (NAACP, YWCA or UNSDG). In addition, these social non-profit entities act as advisors to the companies in the various funds by initiating dialogue as to what can be improved upon from an ESG perspective. The dialogue and engagement between the non-profit and the company, including the curation of the specific screening tool, is a defining characteristic of Impact Shares. The social group impacted has a direct role in initiating what characteristics are important at a corporate level, ie. diversity, pay gap, environment, etc.
Ultimately, Impact Shares has three main goals:
Give money back to the non-profits with which it works;
Curate social screens that act as a road map and encourage engagement around social issues; and
Allow the Impact Shares platform to be a social barometer and potentially have every social issue reflected in a fund.
A great deal of this conversation centers around the millennial client. Research indicates that millennials are twice as likely to invest in funds that target specific social, environmental or social goals and to prioritize a values-based financial advisor (source: EY). Currently, Powell feels there is a communication bar between existing financial advisors and millennials. I would add females to that group but the tides do seem to be changing as financial advisors and firms realize the investment potential of women and millennials.
While currently funded in large part by the Rockefeller Foundation’s Zero Gap innovative finance portfolio, the challenge for Impact Shares is to move past the media attention around its ETF’s and impact investing generally and create a viable fund that can proceed to make a difference. To do this, it needs to build up its funds, a job with which Powell spends the majority of his time, and scale the offering so it can make good on its admirable goals.
***** The above is financial information not financial advice. Please see Legal Disclaimer for further information. I, nor The Capital Pink, are financial advisors and are not affiliated in any way with Impact Shares. See a financial advisor for financial advice on these investment products or any discussed on this site.
*** Cover photo courtesy of Milkovi on Unsplash