, a pioneer in the sustainable investing space with a line of
actively managed mutual funds, is now bringing its philosophy to
the world of exchange traded funds (ETFs).
It was a sign of the times. Way back in 1971, Pax World was
started by two United Methodist Ministers who wanted to create a
mutual fund that didn't invest in weapons manufacturers because of
the Vietnam War. From that beginning, an entire investment theme
was born and Pax World went on to create 11 mutual funds that
currently have $24 billion in assets under management.
Today, Pax World has entered the ETF world with the launch of
its first fund:
ESG Shares North America Sustainability Index (NYSEArca:
. The fund tracks the FTSE KLD North America Sustainability Index,
a sector-neutral index of companies domiciled in North America. Two
more funds will follow in the next week or so:
ESG Shares FTSE Environmental Technologies (ET50)
ESG Shares Europe Asia Pacific Sustainability Index
The "ESS" in the funds' names stands for environment, social and
governance, three criteria on which all companies included in each
fund are evaluated, says Joe Keefe, Pax World's president and
Factors considered under each area include:
- Environmental: emissions, waste, recycling, steps taken to
mitigate climate change, efforts to use energy more
- Social: how employees are treated, supply chain practices,
discrimination, gender diversity in upper management, how the
company operates in its community.
- Governance: business ethics, board structure, diversity,
whether the board truly represents the shareholders or is just a
rubber stamp for management.
"We think all these criteria are issues that can be very
important to a company's bottom line and important to its stock
price," Keefe says. [
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While many so-called "socially responsible ETFs" screen out
certain companies or industries, such as tobacco, gambling, alcohol
and the like, Keefe doesn't define sustainable investing by what
it's excluding, but by what it's including, preferring to take into
account those environmental, social and governance factors into
their analysis and decision-making.
For that reason, Keefe stresses that there's a difference
between "socially responsible" and "sustainable" investing. The
companies that Pax World's funds include "tend to have stronger
profiles, tend to be better managed, forward-thinking, anticipating
and mitigating risk and focused on the long-term," he says. [
Your Guide to Green ETFs.
As both a mutual fund provider and now an ETF provider, Keefe
sees both types of investments as complementary. "We would like to
offer both mutual funds and ETFs and both actively managed
strategies and passive strategies," he says. "An argument can be
made for both approaches, and the more choices for investors, the
As their line of ETFs grow, Pax World plans to stay solely
focused on the sustainable investing approach. [
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"We helped to build this industry and we're just as dedicated to
sustainable investing as a value shop would be to value investing.
We believe it's a smarter investing approach and it serves society
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