The Humankind ETF (HKND) is a US stock that claims to give investors the opportunity to invest in the future of humankind. It operates on the basis that each of us has the chance to change the fate of the world through investing and therefore, they created the Humankind US Stock ETF. The Humankind ETF is supposedly designed to make it easier for people looking to invest in a way that creates a positive impact for both the investor, humanity, and the planet. However, upon further examination, the ETF is not sustainable at all nor does it seem to have much of a positive impact on the planet or humankind. Therefore, all things considered, I have decided to award the Humankind ETF 0/3 planets.
The Humankind ETF contained 95 million dollars in assets across 998 holdings as of September 30th, 2021. This ETF invests its assets in companies it believes have a positive impact on humanity. The top 10 holdings have an overall ESG score of 26.24, which makes it a medium risk level ESG score, and the list is composed of companies such as Verizon, Apple, Microsoft, Procter & Gamble, and Pfizer. It was surprising that an ETF created to help foster positive change for our environment would be considered moderate risk when evaluated (by Morningstar) based on its environmental, social, and governance risk. I would expect an ETF designed to help investors easily invest in green companies to have a negligible or low ESG risk score, however, it was not surprising to see that it was of medium risk since large companies like Apple and Johnson & Johnson are some of the top 10 holders yet are not known for their sustainable, eco friendly, or ethical practices. On the contrary, most of the companies on the top 10 holdings, such as Apple and Pfizer, have dumped millions of pounds of waste into landfills and have violated the EPA’s clean air act, respectively. This makes it quite clear that the Humankind ETF is driven by profit, rather than the desire to create true change.
Humankind ETF calculates the index of a company based upon its economic impact on humanity, which is defined as investors, customers, employees, and society at large. They award these companies credit if they provide investors, customers, employees or society with a net positive impact in some way, through means such as customer satisfaction of goods and services, salaries, bonuses, and benefits, reflecting the value of the estimated external unaccounted costs or benefits to society, as well as other specific factors, such as healthcare benefits and greenhouse gas emissions. Despite this broad SRI criteria, the portfolio managers emphasize that although they will typically invest in issuers that meet these criteria, they may also invest in those that do not meet every one of these criteria and may even invest in companies that may be perceived as ‘sinful’ and ‘dirty’, which I have directly quoted from their website. This is because they believe that as long as the net value provided to humanity by the company, all things considered, is still positive and meets the criteria for inclusion in the index (which is measured and published by Solactive AG), then a company may be included. This seems absurd to me because it emphasizes the subjectiveness of what constitutes a ‘net positive value’ to humanity and how it is measured.
The fund is managed by Yi Yi Mon Aye Han who has been the fund’s co-portfolio manager since the fund’s inception in 2021, and Dr. Yan Zelener. PhD. Han and Dr. Zelener are primarily responsible for the management of the fund, as well as investing cash inflows, implementing investment strategy, and researching and reviewing investment strategy. Han has a bachelor of engineering from the National University of Singapore and a M.S. in financial engineering from NYU while Engineering while Dr. Zelener has a PhD in History from Columbia University and a B.S. in computer science and history from MIT. While their qualifications are impressive, and they may be knowledgeable investors / portfolio managers, nothing about their background gives me the impression that they are educated enough on sustainability to create an impactful ETF that achieves their goal of providing investors with an easy way to create a lasting, positive impact on the planet.