Good news for ethical investors. If the evidence from a high profile ETF (Exchange Traded Funds) is anything to go by if you have been trading in vegan-friendly stocks your returns will have outpaced those from traditional companies.
Beyond Investing’s US Vegan Climate Index, which only trades in companies with cruelty-free and sustainable investing announced this week that it has outperformed the S&P 500 of 5.93 per cent, deleting an annualised excess return of 2.92 per cent.
The index excludes companies involved in animal testing, animal derived products, fossil fuel, human rights abuses and other factors. These parameters remove approximately 49 per cent of the market capitalisation of the top 500 US large cap stocks.
The weighted average market capitalisation of the 278 companies that currently make up the index is USD155 billion and the median market cap is USD21 billion. Companies who are featured include high profile green innovators like Tesla and Beyond Meat, alongside tech giants, Google, Facebook, Microsoft. It should be obeserved though that while it has the S&P 500, it hasn’t achieved the same levels of growth as the tech-focused Nasdaq index.
At the etfLIVE Europe Digital Summit 2020 CEO and former investment analyst Claire Smith outlined the rationale behind the ETF. “Creating this Index was the first time that the proportion of the US stock market whose business models harm animals and the environment was properly identified,” says Smith. “Statistics show that 9.7 million Americans now identify as vegan and this audience is hungry for financial products which adhere to the principles that they live by, they do not want their money supporting businesses whose activities they oppose.”
Although recent-ish IPOs like Beyond Meat have enjoyed relatively stable years, the index has largely been driven by the success of tech companies.
“VEGAN benefited from being overweight in technology, communications and financials, as well as its removal of energy and underweight in industrials, and these tilts compensated for it being underweight consumer stocks, healthcare and utilities,” said Smith.
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