Not everyone experiences climate change in the same way. The impacts of climate change are more harmful to those with fewer financial resources, and those who do not have the ability to mitigate the impact of rising sea levels, higher temperatures, lower crop yields, or declining water and air quality.
As investors, we have the opportunity to help address this. One way is by investing in the Adasina Social Justice All Cap Global ETF (JSTC). JSTC is built around four key investing themes: racial justice, social justice, economic justice, and climate justice. Recognizing that people and communities closest to an issue are often those best positioned to know the solutions, the fund and its underlying index seek to combine financial expertise with community-sourced wisdom.
In the case of climate justice, we seek to identify and exclude companies with business practices that accelerate climate change. Those practices include fossil fuel extraction and funding, extractive agriculture, deforestation , mining, and carbon emissions, among others. We’ve gathered community input by listening to social justice organizations including ETC Group, and Friends of the Earth, and launched our work on Extractive Agriculture to encourage investors to join us in divesting from the most troubling areas of the industrial agriculture industry.
Anticipating the Impact on Financial Assets
The harmful practices flagged by our unique screens may put companies at serious reputational and financial risk, so in addition to excluding these companies because we don't want to give capital to companies that are damaging the planet, we also see this as a risk mitigation technique. Conversely, investing in companies that avoid these practices has the potential to add value to a portfolio.
That climate change presents a material investment risk is not just our view; in 2020 the Federal Reserve flagged the issue in its biannual financial stability report, warning about the potential for abrupt changes in asset values as a result of a warming planet. As then Federal Reserve Governor, now Central Bank Vice Chair, Lael Brainard said at the time, “Acute hazards, such as storms, floods, or wildfires, may cause investors to update their perceptions of the value of real or financial assets suddenly.”
Industries in the crosshairs include insurance (think coastal flooding and extreme weather events), transportation, and agriculture. Indirect impacts like increased immigration can also result in social unrest and economic disruption. These once amorphous social costs are increasingly being priced in by governments and markets and the dollar value is material. By one recent White House estimate, floods, drought, wildfires, and hurricanes amplified by climate change could cost the U.S. federal budget about $2 trillion per year by the end of the century. That’s real money with real impacts on the economy and investors.
Creating Positive Change
JSTC is not just about excluding companies or industries. It’s about affirmatively seeking out those companies that are on the forefront of movements for positive change. We do this using both traditional ESG metrics as well as Adasina’s proprietary social justice investment screens to select securities for the fund’s underlying index, drawing from a global universe of public equities across all major asset classes.
As noted in our earlier blogs, the ESG world has undergone both enormous growth and a dramatic reimagining of the role ESG data plays in portfolio construction. Though the fund uses an index-based financial approach, it is actively managed for social issues. What does that mean? As an actively managed ETF, JSTC goes one step further, continually evaluating the holdings and reacting to changes on the ground as needed to ensure the holdings remain in alignment with the fund’s core values.
Every day we see that ESG concerns are also the concerns of investors (and fiduciaries). Those looking for an ETF that can act as a bridge between the financial markets and social justice, and is accountable to the well-being of the people and the planet they impact, should consider an investment in JSTC.
At Adasina Social Capital, we’re committed to making large-scale, systemic change through investments in financial markets. Our diverse team of people from non-traditional backgrounds works closely with the communities we intend to impact – aligning investors with social justice movements. Beyond creating our own investment criteria and portfolios, Adasina mobilizes investors to drive long-term impact through industry campaigns and education. Join us in becoming unstoppable agents of meaningful change for people and our planet!