Goldman Sachs Launches ETF Based on 'Just Companies'
An organization founded by billionaire investor Paul Tudor Jones II in the fall of 2012 has launched the Just ETF, an Exchange Traded Fund, with Goldman Sachs—almost six years after the Enterprise Engagement Alliance’s Engaged Company Stock Index debuted at TheEEA.org.
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Slowly but surely, the investment community and business media are awakening to the new focus on human capital investments. This week, more than 10 years after the creation of the Enterprise Engagement Alliance and almost six years after the Engaged Company Stock Index (ECSI), influential New York Times financial journalist Andrew Ross Sorkin highlights a new ESG (Environmental, Social and Governance) fund that “scores businesses using a complex formula related to workers, customers, products, environment, jobs, communities and management. Only six percent of the calculation of the index relates to how well a company provides investor return.” The rankings are based in part on the results of surveys on American attitudes about environmental, social, and governance issues.
According to the New York Times article, the new Goldman Sachs “Just ETF” fund is based on the methodologies of an organization known as Just Capital, founded by billionaire investor Paul Tudor Jones based on an idea passed on to him by spiritual advisor Deepak Chopra. “Why can’t companies focus their capital—human and financial—on being change agents for societal betterment, a change agent for justice?” a student had asked Chopra.
In the article, Sorkin says, “Whether the formula is a winning one for investors is a bit of an open question. The fund would have outperformed the Russell 1000 by 3.47 percent over the past two years. That’s the good news. The bad news is there is no way to test the formula any further back, and each year the index changes based on shifts in the polling. If Americans become more concerned about job creation and less concerned about worker pay, different companies could be included.”
Editor’s note: the Enterprise Engagement Alliance’s Engaged Company Stock Index (ECSI) has outperformed the S&P 500 in the six years since it was created by 40 percentage points and does not take into account how well a company provides investor return in its selection criteria. See TheEEA.org for details.
According to the article, the fund is based on Just Capital’s selection of companies in the Russell 1000 companies, “tracking the top 50 percent of those in each industry based on Just Capital’s publicly available model.” The top five companies from 2017 were Intel, Texas Instruments, Nvidia, Microsoft and IBM. (Intel and Microsoft are on the ECSI list as well.)
Sorkin cited the economic benefits of JustETF companies: “They paid 71 percent less in fines for consumer sales-terms violations and 94 percent less in Equal Employment Opportunity Commission (EEOC) fines, produced 45 percent lower greenhouse gas emissions per dollar of revenue, and created American jobs at a 20 percent greater rate.”
Investors will pay a 0.2 percent fee, which reportedly is about half the price of most other ESG.-oriented funds.
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