iShares, the world's largest exchange-traded fund sponsor, filed
paperwork with the U.S. Securities and Exchange Commission to bring
to market an equities ETF that excludes companies in countries with
human rights violations, adding another choice to an existing
lineup of two iShares funds focused on so-called socially
The iShares Human Rights Index Fund aims to exclude countries
associated with widespread death, torture, rape, slavery, forced
labor and forced displacement of communities. The underlying index
is a subset of the MSCI All Country World Index, which is whittled
down to countries with acceptable human rights records based on
MSCI data as of the end of January 2012.
With human rights in the spotlight lately due to the recent
rebellions against despots in Syria and Libya, iShares couldn't
have picked a more appropriate time to register its new fund.
Socially responsible investing has existed at the margins of the
finance world but it is receiving more attention due to rising
awareness of issues such as global warming and turmoil in countries
such as oil-rich Sudan.
iShares sponsors the two most successful social-values-based
ETFs:the $176.8 million iShares MSCI USA ESG Select Social Index
Fund (NYSEArca:KLD) and the $168.9 million iShares MSCI KLD 400
Social Index Fund (NYSEArca:DSI). Both ETFs have an annual expense
ratio of 0.50 percent.
iShares didn't disclose a ticker or an expense ratio for the
planned human rights ETF.
iShares Success The Exception
While iShares has had success attracting investors to its
socially conscious ETFs, DSI and KLD, the record on funds based on
do-gooder sentiments and social conscience is mostly
Pax World, the Portsmouth, N.H.-based money management
firm, has two funds based on social environmental and
governance screens, the Pax MSCI EAFE ESG Index ETF (NYSEArca:EAPS)
and the Pax MSCI North American ESG Index ETF (NYSEArca:NASI).
Together, the two funds had combined assets of $14.2 million as of
March 4, according to data compiled by IndexUniverse.
Even worse, last year, Tulsa, Okla.-based FaithShares closed
shop after its five funds linked to particular pockets of the
Christian world failed to attract more than about $10.5
The funds were too fine-tuned for their own good, the chief
executive of the company told IndexUniverse a short time after the
company closed, but in a larger sense, the low assets at both
FaithShares and Pax World speak to the difficulty socially minded
strategies have gaining investors' attention.
Human Rights ETF Index Methodology
The iShares Human Rights Index Fund will use a representative
sampling strategy to achieve its investment objectives, meaning it
won't own all the securities screened.
As of Dec. 31, 2011, the underlying index consisted of 8,905
companies. They were located in the following countries:Australia,
Austria, Belgium, Brazil, Canada, Chile, China, Colombia, Czech
Republic, Denmark, Egypt, Finland, France, Germany, Greece, Hong
Kong, Hungary, India, Indonesia, Ireland, Israel, Italy, Japan,
Malaysia, Mexico, Morocco, the Netherlands, New Zealand, Norway,
Peru, the Philippines, Poland, Portugal, Russia, Singapore, South
Africa, South Korea, Spain, Sweden, Switzerland, Taiwan, Thailand,
Turkey, the United Kingdom and the United States.
Although this fund is based primarily in stable countries, the
prospectus warns that the ETF may face numerous market trading
risks, including losses from trading in secondary markets, periods
of high volatility, and potential lack of an active market for the
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