Inspire Investing, based out of Hollister in California, has rolled out two new Large Cap and Small-Mid Cap ETFs designed to appeal to Evangelical Christians, a potential market worth over $13 trillion according to its own research.
Notably, the ETFs are attempting to utilize measurement practices based on “Biblically Responsible Investing” or BRI and which are disclosed on their prospectus.
Exclusionary Screening
Among the practices listed in the funds prospectus that will be used to screen out investments – “abortion, gambling, alcohol, pornography or the LGBT lifestyle.”
Inspire also plans to, later this year, launch a corporate bond ETF based on the same investing methodology.
ESG and SRI ETFs, or Sustainable and Responsible Investing Exchange Traded Funds, are collectively a growing class of impact investment vehicles.
According to BlackRock, much of this increasing demand is driven by millennials and women; both demographics have an interest in sustainability and impact outcomes, in addition to financial returns.
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“The Inspire Global Hope Large Cape ETF (BLES) tracks Inspire’s Global Hope Large Cap Equal Weight Index, including companies with a market capitalization of $10 billion or more. The Inspire Small/Mid Cap Impact ETF (ISMD) tracks Inspire’s Small/Mid Cap Impact Equal Weight Index, including companies with market capitalizations spanning from $1 billion to $3.5 billion.
The indexes were developed using Inspire’s impact screen, which applies BRI standards , factoring out investments that conflict with Evangelical values and ranking remaining companies by how well they generate impact in areas important to Christians—including human trafficking relief efforts, Bible distribution, and clean water projects.
Companies with participation in abortion, gambling, alcohol, pornography or the “LGBT lifestyle” will be factored out of the new funds, according to their prospectus. Moreover, ties to countries sponsoring terrorism, poor labor practices and human rights violations against Christians will also result in a company being factored out.
CEO Robert Netzly said these ETFs and BRI in general have a broader appeal beyond Christian values-based investors.
“We built BRI to be the Chick-Fil-A of investing,” said Netzly. “You don’t go in and ask for a Christian chicken sandwich; you ask for a good sandwich.”
Over the last decade however, faith-based ETFs haven’t had much success. Notably, in 2011, FaithShares shut down each of its five ETFs, tailored to sects of Christianity, and a Sharia-compliant ETF developed by Javelin shut down in 2010.
Another big issue has been high expense ratios which, in the case of FaithShares, were close to 90 basis points. Faith-based mutual funds also tend to have above-average expense ratios.
Netzly said the Inspire funds will hit the market with a 65-basis point fee and by the end of the year should be in the mid-40s, making it lower than the industry average for ETFs.
Source: Wealth Management
