RRussia’s invasion of Ukraine is causing a range of American and European companies to stop doing business in Russia.
In some ways, this can be seen as a model that is transparent and takes into account stakeholder capitalism – a broader form of traditional capitalism. There are listed index funds that provide access to emerging stakeholder capitalism, including ARK Transparency ETF (CTRU).
With a focus on transparent companies, CTRU offers investors not only a unique approach to equities, but one that refreshes environmental, social and governance (ESG) style while bringing stakeholder capitalism to the fore.
“The idea that ESG concerns are financially material and therefore can impact a company’s bottom line is a core part of sustainable investing and a key reason for its rapid growth. The funds that we call “ESG funds” are generally those in which ESG analysis plays a central role. Today, most asset managers have incorporated ESG analysis to some degree into their investment process,” notes Morningstar analyst Jon Hale.
It can be said that in the midst of the war between Russia and Ukraine, some Western companies are showing transparency not only to investors, but also to other investors, recognizing that the invasion of the sovereign country by the Russia does not match their corporate values.
“As of this writing, at least 340 international companies have announced their withdrawal from Russia. It’s not just because of ESG, as other stakeholders, especially customers, employees and business partners, are clamoring for companies to leave Russia,” adds Hale.
The CTRU tracks the Transparency Index. An interesting element in the transparency equation is that while CTRU is not a dedicated ESG ETF in the traditional sense, several of its constituents are directly involved in addressing environmental issues. These holdings include Canadian Solar (NASDAQ:CSIQ) and Tesla (NASDAQ:TSLA).
“The urgent need for a just transition to a low-carbon economy to ward off the worst effects of climate change is, of course, a key driver of sustainability-themed investing. Funds that focus on climate action or other sustainability themes differ from those taking a more general ESG approach,” notes Hale.
Transparent companies are significantly less likely to become embroiled in environmental controversies than their less transparent counterparts. Additionally, highly transparent companies may be more likely to prioritize ESG issues, providing opportunities for investors to have their voices heard on this front.
“Shareholder support for ESG-related proposals has exploded in recent years. Not so long ago, support of just 10% for a shareholder proposal was considered a “win” because it allowed the proposal to be resubmitted the following year, sometimes prompting management to take steps to resolve the problem. Today, it’s not uncommon for these proposals to get a majority of voted shares,” concludes Hale.
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